Corporate Bond Returns and Volatility |
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Authors: | Nianyun Cai Xiaoquan Jiang |
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Affiliation: | 1. University of Michigan‐Dearborn;2. Florida International University |
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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. |
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Keywords: | corporate bond return volatility decomposition dynamic relation G11 G12 C12 C13 |
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