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The high-yield segment of the corporate bond market: a diffusion modelling approach for the United States, the United Kingdom and the euro area

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Author Info
Gabe de Bondt () (European Central Bank, Kaiserstr. 29, D-60311 Frankfurt am Main, Germany)
David Marqués () (European Central Bank, Kaiserstr. 29, D-60311 Frankfurt am Main, Germany)

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Abstract

This study empirically examines the development of the high-yield segment of the corporate bond market in the United States, as a pioneer country, and the United Kingdom and the euro area, as later adopting countries. Estimated diffusion models show for the United States a significant pioneer influence factor and autonomous speed of diffusion. The latter is found to be higher in Europe than in the United States as also macroeconomic factors are considered. The high-yield bond diffusion pattern is significantly affected by financing need variables, e.g. leverage buy-outs, mergers and acquisitions, and industrial production growth, and return or financing cost variables, e.g. stock market return and the spread between the yield on speculative-grade and BBB-rated investment-grade bonds. These findings suggest that the diffusion of new financial products depends on the macroeconomic environment and can be quickly in case of the diffusion from a pioneer country to later adopting countries.

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Paper provided by European Central Bank in its series Working Paper Series with number 313.

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Length: 42 pages
Date of creation: Feb 2004
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Handle: RePEc:ecb:ecbwps:20040313

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Related research
Keywords: High-yield bond market Financial innovation Diffusion models

Find related papers by JEL classification:
G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Capital and Ownership Structure
E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  9. Gertler, Mark & Lown, Cara S, 1999. "The Information in the High-Yield Bond Spread for the Business Cycle: Evidence and Some Implications," Oxford Review of Economic Policy, Oxford University Press, vol. 15(3), pages 132-50, Autumn.
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  10. Gabe de Bondt, 2002. "Euro area corporate debt securities market: first empirical evidence," Working Paper Series 164, European Central Bank. [Downloadable!]
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  12. Mahmood, Talat, 2000. " Survival of Newly Founded Businesses: A Log-Logistic Model Approach," Small Business Economics, Springer, vol. 14(3), pages 223-37, May. [Downloadable!] (restricted)
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  1. Philipp Hartmann & Stefan Straetmans & Casper G. De Vries, 2005. "Banking System Stability: A Cross-Atlantic Perspective," NBER Working Papers 11698, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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