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Equity Volatility and Corporate Bond Yields

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  • John Y. Campbell
  • Glen B. Taksler

Abstract

This paper explores the effect of equity volatility on corporate bond yields. Panel data for the late 1990's show that idiosyncratic firm-level volatility can explain as much cross-sectional variation in yields as can credit ratings. This finding, together with the upward trend in idiosyncratic equity volatility documented by Campbell, Lettau, Malkiel, and Xu (2001), helps to explain recent increases in corporate bond yields.

Suggested Citation

  • John Y. Campbell & Glen B. Taksler, 2002. "Equity Volatility and Corporate Bond Yields," Harvard Institute of Economic Research Working Papers 1945, Harvard - Institute of Economic Research.
    • Handle: RePEc:fth:harver:1945
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    File URL: http://www.economics.harvard.edu/pub/hier/2002/HIER1945.pdf
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    More about this item

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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