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Aggregate Earnings And Corporate Bond Markets
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Book Synopsis Aggregate Earnings and Corporate Bond Markets by : Xanthi Gkougkousi
Download or read book Aggregate Earnings and Corporate Bond Markets written by Xanthi Gkougkousi and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: I examine the previously unexplored relation between aggregate earnings changes and corporate bond market returns. I find that aggregate earnings changes have a negative relation to investment-grade corporate bond market returns and a positive relation to high-yield corporate bond market returns. The aggregate earnings-returns relation is lower (i.e., less positive or more negative) for bonds with higher credit ratings and longer maturities. Further, I show that the aggregate earnings-returns relation is driven by both the expected and the news component of aggregate earnings changes. The expected component is negatively related to expected returns, and the news component is positively related to cash flow news and changes in nominal interest rates, and negatively related to changes in default premia. My results contribute to the understanding of the role of earnings in corporate bond markets as well as the macroeconomic role of accounting information.
Book Synopsis Corporate Bond Returns and the Financial Crisis by : David Aboody
Download or read book Corporate Bond Returns and the Financial Crisis written by David Aboody and published by . This book was released on 2014 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: We assess the impact of the recent financial crisis and government interventions to ameliorate the ensuing recession on corporate bond returns through the lens of bond market reactions to news conveyed by changes in aggregate earnings as a proxy for changes in expected future cash flows and changes in T-Bill rates as a proxy for changes in expected future discount rates. The association of T-Bill rate changes with bond returns is negative as expected prior to the financial crisis, but shifts to positive with the onset of the crisis partly explainable by government bailouts of large banks, and flight to safety for bonds issued by other institutions. The association of earnings changes with bond returns is positive as expected prior to the crisis, but, while remaining positive for investment grade, becomes insignificant for speculative grade bonds. The absence of an effect for investment grade bonds we attribute timely loss recognition in earnings by financial institutions subject to immediate loss recognition under mark-to-market accounting and profits during recovery as government relief took effect. The latter shift to insignificance we attribute to earnings changes reflecting diminished earnings persistence and delayed recognition of losses by non-financial institutions. Generally speaking, our results suggest that government intervention during the crisis period had significant effects on corporate bond markets. We also observe that earnings changes as a source of cash flow news is sensitive to the accounting policies that come to bear. More broadly, further results suggest that relations between bond returns and news conveyed by earnings and T-Bill rate changes are sensitive to the business cycle.
Book Synopsis The Incredible Upside-Down Fixed-Income Market: Negative Interest Rates and Their Implications by : Vineer Bhansali
Download or read book The Incredible Upside-Down Fixed-Income Market: Negative Interest Rates and Their Implications written by Vineer Bhansali and published by CFA Institute Research Foundation. This book was released on 2021 with total page 107 pages. Available in PDF, EPUB and Kindle. Book excerpt: In recorded financial history, there are almost no occasions, other than the present, where a significant portion of the global bond markets has been trading at negative nominal yields. Is this an anomaly or what will be the normal state of the financial markets in years to come? This monograph investigates the ongoing debate between the pros and cons of negative nominal yields and the economic rationale(s) that are used to justify or criticize underlying policies. Even in academic circles, few agree on the costs and benefits of negative yields. Surveying the global bond markets of the day, I find the impact of negative yields in almost all regions and sectors, though sovereign bond markets, which are closest to monetary policy, are the dominant category of bonds with negative yields. I next look at the participants in the negatively yielding bond market and at the motivations that justify their actions. The conclusion is that although different participants might have different reasons to buy negatively yielding bonds, their collective action is certainly responsible for creating a local equilibrium in which these markets clear. Central bank policy is the next focus in this monograph, and I discuss in depth the economic rationale as propounded by one such bank, the European Central Bank. I conclude with a discussion of the blurring lines between monetary and fiscal policy, which are likely to become centerpieces in future years as global sovereign debt levels rise. Next, I look at the influence of negative yields on other asset markets, such as equities, and especially derivatives markets, such as the demand for options. A discussion of potential risks then follows. The monograph concludes with a review of the impact of negative yields on nonfinancial aspects of society. Although the forecast is anything but crystal clear, the evolution of markets and economics in the years to come will undoubtedly be influenced by this massive economic experiment of negative yields.
Book Synopsis Corporate Bond Quality and Investor Experience by : Walter Braddock Hickman
Download or read book Corporate Bond Quality and Investor Experience written by Walter Braddock Hickman and published by . This book was released on 1958 with total page 576 pages. Available in PDF, EPUB and Kindle. Book excerpt: A study by the National Bureau of Economic Research, New York.
Book Synopsis Liquidity and Asset Prices by : Yakov Amihud
Download or read book Liquidity and Asset Prices written by Yakov Amihud and published by Now Publishers Inc. This book was released on 2006 with total page 109 pages. Available in PDF, EPUB and Kindle. Book excerpt: Liquidity and Asset Prices reviews the literature that studies the relationship between liquidity and asset prices. The authors review the theoretical literature that predicts how liquidity affects a security's required return and discuss the empirical connection between the two. Liquidity and Asset Prices surveys the theory of liquidity-based asset pricing followed by the empirical evidence. The theory section proceeds from basic models with exogenous holding periods to those that incorporate additional elements of risk and endogenous holding periods. The empirical section reviews the evidence on the liquidity premium for stocks, bonds, and other financial assets.
Book Synopsis An Investigation of Changes in Corporate Bond Ratings by : Phillip Andrew Langefeld
Download or read book An Investigation of Changes in Corporate Bond Ratings written by Phillip Andrew Langefeld and published by . This book was released on 1978 with total page 398 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Are Capital Market Anomalies Common to Equity and Corporate Bond Markets? An Empirical Investigation by : Tarun Chordia
Download or read book Are Capital Market Anomalies Common to Equity and Corporate Bond Markets? An Empirical Investigation written by Tarun Chordia and published by . This book was released on 2017 with total page 55 pages. Available in PDF, EPUB and Kindle. Book excerpt: A significant fraction of firms' financing occurs via public debt markets. Accordingly, we investigate whether financial statement characteristics and other variables that predict equity returns also predict corporate bond returns. Profitability, asset growth, and equity market capitalization negatively predict corporate bond returns, but other predictors, like accruals and earnings surprises, do not. Since smaller, unprofitable firms should be more risky, and firms with high asset growth (or high real investment) should have lower required returns, the evidence indicates that corporate bond returns accord with the risk-reward paradigm. Stock markets lead bond markets, consistent with equities aggregating diverse information and transmitting it to bonds. Overall, we find that accounting for transaction costs, bonds are efficiently priced.
Book Synopsis The Future of China's Bond Market by : Mr. Alfred Schipke
Download or read book The Future of China's Bond Market written by Mr. Alfred Schipke and published by International Monetary Fund. This book was released on 2019-03-13 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: China’s bond market is destined to play an increasingly important role, both at home and abroad. And the inclusion of the country’s bonds in global indexes will be a milestone for its financial market integration, bringing big opportunities as well as challenges for policymakers and investors alike. This calls for a good understanding of China’s bond market structure, its unique characteristics, and areas where reforms are needed. This volume comprehensively analyzes the different segments of China’s bond market, from sovereign, policy bank, and credit bonds, to the rapidly growing local government bond market. It also covers bond futures, green bonds, and asset-backed securities, as well as China’s offshore market, which has played a major role in onshore market development.
Book Synopsis An Anatomy of Corporate Bond Markets: Growing Pains and Knowledge Gains by : Li L. Ong
Download or read book An Anatomy of Corporate Bond Markets: Growing Pains and Knowledge Gains written by Li L. Ong and published by INTERNATIONAL MONETARY FUND. This book was released on 2005-07-01 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: The objective of this paper is to discuss the key issues relating to the development of local corporate bond markets. We examine the requirements for local corporate bond market development, and compare and contrast experiences across both mature and emerging markets. We suggest that core aspects such as benchmarking, corporate governance and disclosure, credit risk pricing, the availability of reliable trading systems, and the development of hedging instruments are fundamental for improving the breadth and depth of corporate debt markets. The demand and supply of corporate bonds are dependent on factors such as the investor base, both local and foreign, and government policies toward the issuance process and associated costs, as well as the taxation regime. The sequencing of reforms is key to market development.
Book Synopsis Corporate Bond Markets by : Moorad Choudhry
Download or read book Corporate Bond Markets written by Moorad Choudhry and published by Wiley. This book was released on 2005-12-16 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Moorad continues to demonstrate his financial expertise, and shows us why he is one of the best-selling authors in our industry today. - Eric Subliskey, Vice President, Short-Term Fixed Income JPMorgan Securities inc., New York An invaluable reference work for anyone connected with the corporate debt markets, be they issuer, investor or trader. Dr Choudhry writes in his trademark accessible style and provides the reader with a wealth of data and insight on the latest market products and techniques. Highly-recommended. - Ketul Tanna, Assistant Vice President, Market Risk Management JPMorgan Chase Bank, London The Predominant fixed income author is back with this updated version of Corporate Bond Markets. A Comprehensive work on fixed income products and applications, this book is a valuable reference text and teaching tool. Why go anywhere else for bond market information? - Rod Pienaar, Research Partner YieldCurve.com
Book Synopsis Markets for Corporate Debt Securities by : T. Todd Smith
Download or read book Markets for Corporate Debt Securities written by T. Todd Smith and published by International Monetary Fund. This book was released on 1995-07-01 with total page 88 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper surveys markets for corporate debt securities in the major industrial countries and the international markets. The discussion includes a comparison of the sizes of the markets for various products, as well as the key operational, institutional, and legal features of primary and secondary markets. Although there are some signs that debt markets may be emphasized in the future by some countries, it remains true that North American debt markets are the most active and liquid in the world. The international debt markets are, however, growing in importance. The paper also investigates some of the reasons for the underdevelopment of domestic bond markets and the consequences of firms shifting their debt financing needs from banks to securities markets.
Book Synopsis Empirical Investigations of Equity Market Anomalies in Corporate Bond and Firm Returns by : Frederick M. Hood
Download or read book Empirical Investigations of Equity Market Anomalies in Corporate Bond and Firm Returns written by Frederick M. Hood and published by . This book was released on 2009 with total page 234 pages. Available in PDF, EPUB and Kindle. Book excerpt: "In this thesis I examine two questions related to corporate debt markets. First, how do corporate bond prices react to firm specific information? Second, are the size and book-to-market premiums found in the cross-section of equity returns due to capital structure risk or asset risk? I utilize a unique set of corporate bond returns from Merrill Lynch to provide answers to both questions. In Chapter 1 I describe the bond data and establish that weekly return distributions derived from the Merrill Lynch prices are similar to both pure transaction data and data from a different pricing service. In Chapter 2 I provide evidence that the Merrill Lynch prices reflect firm specific information and the firm specific information in bond prices contains more information about the mean of the firm's cash flows than the variance. I find a positive relationship between weekly bond and stock returns using time-series regressions after controlling for market returns. I also examine cumulative abnormal bond returns around earnings surprises and find that bonds react as predicted given the asymmetric nature of their payoff. Bonds with higher relative credit risk react more to earnings surprises. In addition, bonds react more to negative surprises than positive surprises. Stock prices incorporate the information in earnings surprises relatively faster than bonds do and the relative reaction of bonds to stocks around surprises is small. The demonstration of the bond prices adjusting to firm level information validates their use at the monthly level to build a bond return model. In Chapter 3 I provide strong evidence that capital structure differences across firms account for a significant portion of the book-to-market and size premiums found in equity returns. I first establish that standard measures of equity beta from the Capital Asset Pricing Model do not fully reflect differences in financial leverage across firms as expected. I test the hypothesis that missing low grade debt claims from the market portfolio lead to systematic measurement errors in beta related to financial leverage. I do not find support for this hypothesis. In addition, I find that controlling for asset risk differences across firms does not change the conclusion regarding missing leverage risk from beta. I argue that multiple econometric issues do not allow one to directly control for leverage in equity return asset pricing tests. Therefore, I construct firm returns (weighted debt and equity) using an econometric model of debt returns. The model is estimated using the Merrill Lynch data. I am unable to reject the hypothesis that the premium on book-to-market in firm returns is zero. In addition, the premium on size decreases by more than one half. I also find that coefficients on industry adjusted size and book-to-market are substantially lower. Finally, I link my results to prior studies that argue that size and book-to-market premiums in equity returns are related to default risk since financial leverage is a major determinant of default risk. I examine the relationship between default risk as measured by Moody's KMV and equity and firm returns. I find that there is a positive premium on default risk in equity returns and that the premium is substantially lower in firm returns"--Leaves v-vi.
Book Synopsis Is There a Risk-Return Tradeoff in the Corporate Bond Market? Time-Series and Cross-Sectional Evidence by : Jennie Bai
Download or read book Is There a Risk-Return Tradeoff in the Corporate Bond Market? Time-Series and Cross-Sectional Evidence written by Jennie Bai and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We provide time-series and cross-sectional evidence on the significance of a risk-return tradeoff in the corporate bond market. We find a significantly positive intertemporal relation between expected return and risk in the bond market and the time-series predictability is driven by aggregate systematic risk instead of aggregate idiosyncratic risk. We also propose a new measure of systematic risk for corporate bonds and find a positive link between systematic risk and the cross-section of future bond returns. We provide an explanation for the significance of systematic (idiosyncratic) risk based on different investor preferences and informational frictions in the bond (equity) market.
Book Synopsis The Association of Earnings and Cash Flow Components with Corporate Bond Returns by : David O'Bryan
Download or read book The Association of Earnings and Cash Flow Components with Corporate Bond Returns written by David O'Bryan and published by . This book was released on 1992 with total page 434 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Externalities of Corporate Financial Information and Financial Intermediaries in the Secondary State-Bond Market by : Stephanie Fang Cheng
Download or read book Externalities of Corporate Financial Information and Financial Intermediaries in the Secondary State-Bond Market written by Stephanie Fang Cheng and published by . This book was released on 2019 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study provides the initial evidence on the roles of corporate financial information and financial intermediaries in the secondary state-bond market that is often characterized by informational opacity. In the first chapter, I investigate the informational role of statewide aggregate earnings and find that corporate-earnings changes that are aggregated at the state level are positively associated with state-bond returns. This finding suggests that statewide aggregate earnings provide bondholders with real-time signals about regional economic performance. In cross-sectional analyses, I show that the effect is especially pronounced when bondholders face greater agency costs, higher credit exposure, and greater information opacity, when corporate earnings are ex-ante more relevant to states' economic performance, and when corporate managers and business media disseminate earnings news more extensively. In the second chapter, I further examine whether analyst following and media coverage affect the bargaining power over state-bond dealers for small retail state-bond investors, a group that is severely disadvantaged in the over-the-counter market. I find that analyst following and media coverage on local public firms are negatively associated with the small trade premium in the secondary state-bond market, suggesting that financial analysts and the business media provide unique value in facilitating retail state-bond investors' information discovery process. In cross-sectional analyses, I show that this effect is especially pronounced when public firms' information is ex-ante more precise to states' economic performance, and mitigated when issuers' disclosures are more accessible to retail investors. Taken together, the evidence is suggestive of positive externalities of public companies and their financial intermediaries that extend beyond the corporate sector to the state-bond market.
Book Synopsis Institutional Herding in the Corporate Bond Market by : Fang Cai
Download or read book Institutional Herding in the Corporate Bond Market written by Fang Cai and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Corporate Bond Credit Spreads and Forecast Dispersion by : Levent Guntay
Download or read book Corporate Bond Credit Spreads and Forecast Dispersion written by Levent Guntay and published by . This book was released on 2010 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: Recent research establishes a negative relation between stock returns and dispersion of analysts' earnings forecasts, arguing that asset prices more reflect the views of optimistic investors because of short-sale constraints in equity markets. In this article, we examine whether a similar effect prevails in corporate bond markets. After controlling for common bond-level, firm-level, and macroeconomic variables, we find evidence that bonds of firms with higher dispersion demand significantly higher credit spreads than otherwise similar bonds and that changes in dispersion reliably predict changes in credit spreads. This evidence suggests a limited role of short-sale constraints in our corporate bond data sets. Consistent with a rational explanation, dispersion appears to proxy largely for future cash flow uncertainty in corporate bond markets.
