The Investment Performance of Low-Grade Bond Funds
AbstractThis study extends the literature on the pricing of low-grade bonds by examining the performance of low-grade bond funds. The findings reveal that over the long run low-grade bond fund returns are approximately equal to the returns provided by an index of high-grade bonds. The relative risks of high and low-grade bonds are more difficult to assess. Because of their shorter durations, low-grade bonds are less sensitive to movements in interest rates than high-grade bonds. On the other hand, low-grade bonds are much more sensitive to changes in stock prices than high-grade bonds. When adjusted for risk using a simple two-factor model, the returns on low-grade bond funds are not statistically different from the returns on high-grade bonds. Copyright 1991 by American Finance Association.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by American Finance Association in its journal Journal of Finance.
Volume (Year): 46 (1991)
Issue (Month): 1 (March)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- J. Annaert & J.K. De Ceuster & W. Van Hyfte, 2002. "The Value of Asset Allocation Advice - Evidence of The Economistâ€™s Quarterly Portfolio Poll," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium, Ghent University, Faculty of Economics and Business Administration 02/160, Ghent University, Faculty of Economics and Business Administration.
- Bhanot, Karan, 2005. "What causes mean reversion in corporate bond index spreads? The impact of survival," Journal of Banking & Finance, Elsevier, vol. 29(6), pages 1385-1403, June.
- Paulo Pereira da Silva, 2014. "Sovereign Credit Risk and Stock Marketsâ€“Does the Marketsâ€™ Dependency Increase with Financial Distress?," International Journal of Financial Studies, MDPI, Open Access Journal, vol. 2(1), pages 145-167, March.
- Hunter, David & Kandel, Eugene & Kandel, Shmuel & Wermers, Russ, 2014. "Mutual fund performance evaluation with active peer benchmarks," Journal of Financial Economics, Elsevier, Elsevier, vol. 112(1), pages 1-29.
- Jeremy Leake, 2003. "Credit spreads on sterling corporate bonds and the term structure of UK interest rates," Bank of England working papers 202, Bank of England.
- Norden, Lars & Weber, Martin, 2004. "The comovement of credit default swap, bond and stock markets: An empirical analysis," CFS Working Paper Series 2004/20, Center for Financial Studies (CFS).
- da Silva, Paulo Pereira & Rebelo, Paulo Tomaz & Afonso, Cristina, 2013. "Tail dependence of financial stocks and CDS markets: Evidence using copula methods and simulation-based inference," Economics Discussion Papers 2013-52, Kiel Institute for the World Economy.
- Christian Klein & Christoph Stellner, 2014. "The systematic risk of corporate bonds: default risk, term risk, and index choice," Financial Markets and Portfolio Management, Springer, vol. 28(1), pages 29-61, February.
- Gary Gorton & Andrew Metrick, 2010.
Federal Reserve Bank of St. Louis, issue Nov, pages 507-520.
- Andrew Metrick & Gary Gorton, 2009. "Haircuts," Yale School of Management Working Papers, Yale School of Management amz2395, Yale School of Management, revised 01 Sep 2009.
- Gary B. Gorton & Andrew Metrick, 2009. "Haircuts," NBER Working Papers 15273, National Bureau of Economic Research, Inc.
- Zhiwei Zhang, 2002. "Corporate Bond Spreads and the Business Cycle," Working Papers 02-15, Bank of Canada.
- Rocha, Roberto & Morales, Marco & Thorburn, Craig, 2008.
"An empirical analysis of the annuity rate in Chile,"
Journal of Pension Economics and Finance, Cambridge University Press,
Cambridge University Press, vol. 7(01), pages 95-119, March.
- Rocha, Roberto & Morales, Marco & Thorburn, Craig, 2006. "An empirical analysis of the annuity rate in Chile," Policy Research Working Paper Series 3929, The World Bank.
- Pierides, Yiannos A., 1997. "The pricing of credit risk derivatives," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 21(10), pages 1579-1611, August.
- Steven N. Kaplan & Richard S. Ruback, 1994.
"The Valuation of Cash Flow Forecasts: An Empirical Analysis,"
NBER Working Papers
4724, National Bureau of Economic Research, Inc.
- Kaplan, Steven N & Ruback, Richard S, 1995. " The Valuation of Cash Flow Forecasts: An Empirical Analysis," Journal of Finance, American Finance Association, American Finance Association, vol. 50(4), pages 1059-93, September.
- Gregory R. Duffee, 1996. "Treasury yields and corporate bond yield spreads: an empirical analysis," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 96-20, Board of Governors of the Federal Reserve System (U.S.).
- Luciano Campi & Simon Polbennikov & Sbuelz, 2005. "Assessing Credit with Equity: A CEV Model with Jump to Default," Working Papers 24, University of Verona, Department of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.