An analysis of credit risk spreads for high yield bonds

An analysis of credit risk spreads for high yield bonds The overall growth and volatility in the high yield (HY) bond market has provided a viable source of capital and an interesting investment asset class. The result has been strong interest in the HY bond credit risk spread (CRS) because this series is very volatile and has a significant impact on the availability of capital to issuers and the rates of return and risk results for investors. Given these trends in the HY bond market, our study has two purposes. The first is to examine statistical properties of the CRS series for the aggregate HY bond market and the three rated components. The second purpose is to interpret the influence that a set of variables are expected to have on future CRSs and, therefore, HY bond performance. In summary, the statistical analysis indicates a significant business cycle effect, but does not show a monetary policy impact. Additionally, the study finds significant differences in characteristics among bonds with alternative ratings. The analysis of specific variables highlights the strong influence of direct and indirect measures of default risk, capital market risk factors, a specific measure of monetary policy, and an impact from liquidity within the HY bond market. There was also evidence of segmentation within the HY bond market because the empirical results indicate that we should consider separate models across rating classes that employed different variables as well as coefficients that were significantly different for the same variables. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Quantitative Finance and Accounting Springer Journals

An analysis of credit risk spreads for high yield bonds

Loading next page...
 
/lp/springer_journal/an-analysis-of-credit-risk-spreads-for-high-yield-bonds-fQ1CKlK7SD
Publisher
Springer Journals
Copyright
Copyright © 2010 by Springer Science+Business Media, LLC
Subject
Finance; Corporate Finance; Accounting/Auditing; Econometrics; Operation Research/Decision Theory
ISSN
0924-865X
eISSN
1573-7179
D.O.I.
10.1007/s11156-009-0162-7
Publisher site
See Article on Publisher Site

Abstract

The overall growth and volatility in the high yield (HY) bond market has provided a viable source of capital and an interesting investment asset class. The result has been strong interest in the HY bond credit risk spread (CRS) because this series is very volatile and has a significant impact on the availability of capital to issuers and the rates of return and risk results for investors. Given these trends in the HY bond market, our study has two purposes. The first is to examine statistical properties of the CRS series for the aggregate HY bond market and the three rated components. The second purpose is to interpret the influence that a set of variables are expected to have on future CRSs and, therefore, HY bond performance. In summary, the statistical analysis indicates a significant business cycle effect, but does not show a monetary policy impact. Additionally, the study finds significant differences in characteristics among bonds with alternative ratings. The analysis of specific variables highlights the strong influence of direct and indirect measures of default risk, capital market risk factors, a specific measure of monetary policy, and an impact from liquidity within the HY bond market. There was also evidence of segmentation within the HY bond market because the empirical results indicate that we should consider separate models across rating classes that employed different variables as well as coefficients that were significantly different for the same variables.

Journal

Review of Quantitative Finance and AccountingSpringer Journals

Published: Jan 26, 2010

References

You’re reading a free preview. Subscribe to read the entire article.


DeepDyve is your
personal research library

It’s your single place to instantly
discover and read the research
that matters to you.

Enjoy affordable access to
over 18 million articles from more than
15,000 peer-reviewed journals.

All for just $49/month

Explore the DeepDyve Library

Search

Query the DeepDyve database, plus search all of PubMed and Google Scholar seamlessly

Organize

Save any article or search result from DeepDyve, PubMed, and Google Scholar... all in one place.

Access

Get unlimited, online access to over 18 million full-text articles from more than 15,000 scientific journals.

Your journals are on DeepDyve

Read from thousands of the leading scholarly journals from SpringerNature, Elsevier, Wiley-Blackwell, Oxford University Press and more.

All the latest content is available, no embargo periods.

See the journals in your area

DeepDyve

Freelancer

DeepDyve

Pro

Price

FREE

$49/month
$360/year

Save searches from
Google Scholar,
PubMed

Create lists to
organize your research

Export lists, citations

Read DeepDyve articles

Abstract access only

Unlimited access to over
18 million full-text articles

Print

20 pages / month

PDF Discount

20% off