Corporate Bond Returns and Volatility
AbstractRecent literature emphasizes the relation of stock volatility to corporate bond yields. We demonstrate that during 1996-2005 corporate bond excess return volatility is directly related to contemporaneous corporate bond excess returns. In fact, the decompositions of aggregate bond volatility have a higher contemporaneous correlation with bond yields in comparison to idiosyncratic stock risk. Additionally, bond volatility and idiosyncratic risk are significant predictors of corporate three-month and six-month ahead bond excess returns. We also find that corporate bond volatility contains both slow moving and time-varying components. Copyright 2008, The Eastern Finance Association.
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Bibliographic InfoArticle provided by Eastern Finance Association in its journal Financial Review.
Volume (Year): 43 (2008)
Issue (Month): 1 (02)
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