Corporate bond returns and volatility Article

cited authors

  • Cai, N; Jiang, X

fiu authors

abstract

  • Recent literature emphasizes the relation of stock volatility to corporate bond yields. We demonstrate that during 1996-2005 corporate bond excess return volatility is directly related to contemporaneous corporate bond excess returns. In fact, the decompositions of aggregate bond volatility have a higher contemporaneous correlation with bond yields in comparison to idiosyncratic stock risk. Additionally, bond volatility and idiosyncratic risk are significant predictors of corporate three-month and six-month ahead bond excess returns. We also find that corporate bond volatility contains both slow moving and time-varying components. © 2008, The Eastern Finance Association.

publication date

  • January 1, 2008

Digital Object Identifier (DOI)

start page

  • 1

end page

  • 26

volume

  • 43

issue

  • 1