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Factors Affecting the Credit Spreads Behaviour of USD Malaysian Bonds

This paper addresses empirical analysis of Malaysian credit spreads in a number of directions. Firstly, the investigation of explanatory power of macroeconomic or market variables to the changes in the spreads. Secondly, use of daily data rather than data sampled to match typical macroeconomic data release. Third, a focused study on the market behaviour of bonds issued from a rapidly emerging market. Fourth, the inclusion of semi-parametric measures to better capture the behaviour of the credit spreads. This study finds that changes in credit spread of Malaysian bonds are only receptive to certain macroeconomic factors. Also changes in credit spreads are negatively correlated with the interest factor but this study could not find convincing evidence to support the argument of a negative relationship with the asset factor.

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File URL: http://www.deakin.edu.au/buslaw/aef/workingpapers/papers/2007_10aef.pdf
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Paper provided by Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance in its series Accounting, Finance, Financial Planning and Insurance Series with number 2007_10.

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Length: 45 pages
Date of creation: 17 Jul 2007
Date of revision:
Handle: RePEc:dkn:acctwp:aef_2007_10
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Web page: http://www.deakin.edu.au/buslaw/aef/index.php

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  1. Eaton, Jonathan & Gersovitz, Mark & Stiglitz, Joseph E., 1986. "The pure theory of country risk," European Economic Review, Elsevier, vol. 30(3), pages 481-513, June.
    • Jonathan Eaton & Mark Gersovitz & Joseph E. Stiglitz, 1991. "The Pure Theory of Country Risk," NBER Chapters, in: International Volatility and Economic Growth: The First Ten Years of The International Seminar on Macroeconomics, pages 391-435 National Bureau of Economic Research, Inc.
  2. Richard Cantor & Frank Packer, 1996. "Determinants and impacts of sovereign credit ratings," Research Paper 9608, Federal Reserve Bank of New York.
  3. Christiansen, Charlotte, 2002. "Credit spreads and the term structure of interest rates," International Review of Financial Analysis, Elsevier, vol. 11(3), pages 279-295.
  4. Duffee, Gregory R, 1996. " Idiosyncratic Variation of Treasury Bill Yields," Journal of Finance, American Finance Association, vol. 51(2), pages 527-51, June.
  5. Fama, Eugene F. & French, Kenneth R., 1989. "Business conditions and expected returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 25(1), pages 23-49, November.
  6. Jonathan Batten & Warren Hogan & Gady Jacoby, 2005. "Measuring credit spreads: evidence from Australian Eurobonds," Applied Financial Economics, Taylor & Francis Journals, vol. 15(9), pages 651-666.
  7. Arturo Estrella & Gikas A. Hardouvelis, 1989. "The term structure as a predictor of real economic activity," Research Paper 8907, Federal Reserve Bank of New York.
  8. Barry Eichengreen & Ashoka Mody, 1998. "What Explains Changing Spreads on Emerging-Market Debt: Fundamentals or Market Sentiment?," NBER Working Papers 6408, National Bureau of Economic Research, Inc.
  9. Reinhart, Carmen & Calvo, Guillermo & Leiderman, Leonardo, 1992. "Capital Inflows and Real Exchange Rate Appreciation in Latin America," MPRA Paper 13843, University Library of Munich, Germany.
  10. Gregory R. Duffee, 1996. "Treasury yields and corporate bond yield spreads: an empirical analysis," Finance and Economics Discussion Series 96-20, Board of Governors of the Federal Reserve System (U.S.).
  11. Michael Fleming & Asani Sarkar, 1999. "Liquidity in U.S. Treasury Spot and Futures Markets," CGFS Papers chapters, in: Bank for International Settlements (ed.), Market Liquidity: Research Findings and Selected Policy Implications, volume 11, pages 1-14 Bank for International Settlements.
  12. George Athanassakos & Peter Carayannopoulos, 2001. "An empirical analysis of the relationship of bond yield spreads and macro economic factors," Applied Financial Economics, Taylor & Francis Journals, vol. 11(2), pages 197-207.
  13. Gregory R. Duffee, 1998. "The Relation Between Treasury Yields and Corporate Bond Yield Spreads," Journal of Finance, American Finance Association, vol. 53(6), pages 2225-2241, December.
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