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Common factors in the performance of european corporate bonds - evidence before and after the financial crisis
journal contributionposted on 2023-06-08, 19:16 authored by Wolfgang Aussenegg, Lukas Goetz, Ranko JelicRanko Jelic
We examine monthly excess returns for 23 Euro-denominated corporate bond indices and propose a new specification for bond asset pricing models. Specifically, we separate level and slope components of term and default risk factors and examine liquidity risk. Our results suggest that level and slope risk factors, derived from complete interest rate and default spread term structures, significantly improve the explanatory power of the Fama and French (1993) 2-factor model. We also demonstrate different sensitivities of risk factors before and after recent financial crisis. The results are robust to calendar seasonality and the consideration of equity market returns. © 2013 Blackwell Publishing Ltd.
JournalEuropean Financial Management
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- Business and Management Publications
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