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Corporate Bond Returns and Volatility

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  • Nianyun Cai
  • Xiaoquan Jiang

Abstract

Recent 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.

Suggested Citation

  • Nianyun Cai & Xiaoquan Jiang, 2008. "Corporate Bond Returns and Volatility," The Financial Review, Eastern Finance Association, vol. 43(1), pages 1-26, February.
  • Handle: RePEc:bla:finrev:v:43:y:2008:i:1:p:1-26
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    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1540-6288.2007.00184.x
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    Cited by:

    1. Belén Nieto & Alfonso Novales & Gonzalo Rubio, 2015. "Macroeconomic and Financial Determinants of the Volatility of Corporate Bond Returns," Quarterly Journal of Finance (QJF), World Scientific Publishing Co. Pte. Ltd., vol. 5(04), pages 1-41, December.
    2. repec:spr:annopr:v:262:y:2018:i:2:d:10.1007_s10479-015-1975-5 is not listed on IDEAS

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