Credit Spreads, Business Conditions, and Expected Corporate Bond Returns

Document Type

Article

Publication Date

2-1-2020

Abstract

Using an aggregate credit spread index, we find that it has substantial predictive power for corporate bond returns over short and long horizons. The return predictability is economically and statistically significant and robust to various controls. The credit spread index and its components have more predictive power for bond returns than conventional default and term spreads. When decomposing the credit spread index into investment- and speculative-grade components, the latter has more predictive power for future bond returns. The source of the index’s predictive power is from its ability to forecast future economic conditions.

Identifier

85130477813 (Scopus)

Publication Title

Journal of Risk and Financial Management

External Full Text Location

https://doi.org/10.3390/jrfm13020020

e-ISSN

19118074

Issue

2

Volume

13

This document is currently not available here.

Share

COinS