The Macroeconomic Uncertainty Premium in the Corporate Bond Market-Reference-Cited by-同舟云学术

The Macroeconomic Uncertainty Premium in the Corporate Bond Market

Published:2020-07-06 Issue:5 Volume:56 Page:1653-1678
ISSN:0022-1090
Container-title:Journal of Financial and Quantitative Analysis
language:en
Short-container-title:J. Financ. Quant. Anal.

Author:

Bali Turan G.,Subrahmanyam Avanidhar,Wen Quan

Abstract

AbstractWe examine the role of macroeconomic uncertainty in the cross section of corporate bonds and find a significant uncertainty premium for both investment-grade (IG) (0.40% per month) and non-investment-grade (NIG) (0.81% per month) bonds. The economic-uncertainty premium declines as we progressively remove downgraded bonds, indicating that the premium represents an increase in required returns for bonds with higher credit and macroeconomic risk. The economic-uncertainty premia vary across equities and bonds in a manner consistent with the heterogeneous risk-aversion levels of dominant players in equities (retail investors) versus bonds (institutional investors).

Publisher

Cambridge University Press (CUP)

Subject

Economics and Econometrics,Finance,Accounting

Reference42 articles.

1. Bali, T. G. ; Subrahmanyam, A. ; and Wen, Q. . “Long-Term Reversals in the Corporate Bond Market.” Journal of Financial Economics,, forthcoming (2019).

2. A Simple, Positive Semi-Definite, Heteroskedasticity and Autocorrelation Consistent Covariance Matrix

3. Are Capital Market Anomalies Common to Equity and Corporate Bond Markets? An Empirical Investigation

4. Does Systemic Risk in the Financial Sector Predict Future Economic Downturns?

5. Market transparency, liquidity externalities, and institutional trading costs in corporate bonds☆

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