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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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  • de Bondt, Gabe
  • Marqués-Ibáñez, David

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. JEL Classification: G32, E44

Suggested Citation

  • de Bondt, Gabe & Marqués-Ibáñez, David, 2004. "The high-yield segment of the corporate bond market: a diffusion modelling approach for the United States, the United Kingdom and the euro area," Working Paper Series 313, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:2004313
    Note: 337418
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    2. Philipp Hartmann & Stefan Straetmans & Casper de Vries, 2007. "Banking System Stability. A Cross-Atlantic Perspective," NBER Chapters, in: The Risks of Financial Institutions, pages 133-188, National Bureau of Economic Research, Inc.

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    More about this item

    Keywords

    diffusion models; financial innovation; high-yield bond market;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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