【本期主题】Prices and Volatilities in the Corporate Bond Market

We document a strong positive cross-sectional relation between corporate bond yield spreads and bond return volatilities. A ten percentage point increase in return volatility is associated with a two percentage point increase in yield spread. As both yield spreads and bond return volatilities tend to be higher for lower credit quality and more illiquid bonds, the yield spread-bond volatility relation is potentially attributable to both credit and illiquidity. To quantify the relative contributions of these two sources, we decompose the coefficient from the yield spread-bond volatility regression into a component related to credit, a component related to illiquidity, and a residual component. Collectively, the credit and illiquidity components explain approximately three-quarters of the yield spread-bond volatility relation with credit and illiquidity contributing in a 70:30 ratio. Ratings and book-to-market are the most important credit risk proxies while many illiquidity proxies, including autocovariances of log returns and implied round-trip costs, contribute to the yield spread-return volatility relation. In contrast, the relation between yield spreads and equity volatility documented in the previous literature is almost exclusively related to credit risk proxies. Furthermore, the yield spread-bond volatility relation contains a significant relation to credit proxies even after controlling for equity volatility, suggesting that bond volatility contains additional credit-related information. Our results are robust to a number of sample cuts including the subprime crisis, maturity, and ratings. Of note, we find that book-to-market is particularly important during the subprime crisis, consistent with a timely market-based variable being particularly informative in a crisis period. In addition, credit risk is a particularly important variable for explaining the yield spread-bond volatility relation for junk bonds, consistent with the Huang and Huang (2012) finding that the relative importance of credit risk in explaining yield spreads is higher for junk bond. We also consider portfolio sorts to address the issue of measurement error, finding that our main results are unchanged.

【报告人】陈佳 北京大学光华管理学院助理教授

俄亥俄州立大学物理学、金融学博士

【时 间】11月21日 上午10:00

【地 点】明德主楼0509室

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报告人简介：

陈佳于2012年加入北京大学光华管理学院， 主要研究兴趣是资产定价，当前研究也包括金融机构，金融危机，以及国际金融。 陈佳在加入北京大学光华管理学院之前，他曾在俄亥俄州立大学的菲舍尔商学院教授过课程。他于2003年在中国科学技术大学取得物理学学士学位。2006 年和2012年，他在俄亥俄州立大学分别取得了物理学硕士学位和金融学博士学位。在教学和学术研究之外，他爱好网球和羽毛球。

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