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Which uncertainty measures matter for the cross-section of corporate bond returns? Evidence from the U.S. during 1973–2020

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  • Lee, Kiryoung

Abstract

I examine which economic uncertainty measures matter for the cross-section of corporate bond returns using 40 corporate bond portfolios for a long period from 1973 to 2020. Out of a comprehensive list of 24 economic uncertainty measures, I find that tax policy uncertainty is the most significant both economically and statistically. I also find that measures that are documented as significantly priced factors – VIX, EPU, and economic uncertainty measures (Jurado et al., 2015) – are not robust to the long sample period and my empirical approach to rigorously estimate uncertainty shocks.

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  • Lee, Kiryoung, 2022. "Which uncertainty measures matter for the cross-section of corporate bond returns? Evidence from the U.S. during 1973–2020," Finance Research Letters, Elsevier, vol. 48(C).
    • Handle: RePEc:eee:finlet:v:48:y:2022:i:c:s1544612322001842
    DOI: 10.1016/j.frl.2022.102913
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    Cited by:

    1. Cheng, Tingting & Jiang, Shan & Zhao, Albert Bo & Jia, Zhimin, 2023. "Complete subset averaging methods in corporate bond return prediction," Finance Research Letters, Elsevier, vol. 54(C).

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    More about this item

    Keywords

    Economic uncertainty index; Cross-section of corporate bond returns; Tax policy uncertainty;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General

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