Credit Spreads, Business Conditions, and Expected Corporate Bond Returns

Journal of Risk and Financial Management

Junbo Wang¹  Xinyuan Tao²  Hai Lin³  Chunchi Wu⁴ 

[1] Department of Economics and Finance, City University of Hong Kong, 220, Hong Kong, China;Martin Tuchman School of Management, New Jersey Institute of Technology, Newark, NJ 07102, USA;School of Economics and Finance, Victoria University of Wellington, Wellington 6140, New Zealand;School of Management, State University of New York at Buffalo, Buffalo, NY 14260, USA;

关键词: credit spreads;    default risk;    corporate bonds;    return predictability;    economic conditions;   

DOI  :  10.3390/jrfm13020020

来源: DOAJ

【 摘 要 】

Using an aggregate credit spread index, we find that it has substantial predictive power for corporate bond returns over short and long horizons. The return predictability is economically and statistically significant and robust to various controls. The credit spread index and its components have more predictive power for bond returns than conventional default and term spreads. When decomposing the credit spread index into investment- and speculative-grade components, the latter has more predictive power for future bond returns. The source of the index’s predictive power is from its ability to forecast future economic conditions.

【 授权许可】

Unknown