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Author: George Theocharides Publisher: ISBN: Category : Languages : en Pages : 288
Book Description
This dissertation consists of twopapers. The first paper examines the propagation of firm-specific shocks as well as market-wide shocks between 1995-2003 using Treasury and corporate bond market data. It then tests the implications of previously proposed models of contagion. I find little support for the industry and counterparty structure hypothesis, suggesting that fundamentals do not generate contagion. Consistent with the information transmission, rebalancing, and liquidity-shock hypotheses, I find evidence of flight to quality during the event periods. However, in contrast to the prediction of the liquidity-shock channel, the corporate bond market, on average, seems to be more liquid during event periods (evidenced by higher trading volume, trading frequency, and mean bond age). Furthermore, there are no significant changes in the trading of assets with the low transaction costs, which is contrary to the rebalancing theory. These findings are more in favor of the correlated information channel as a means of inducing contagion. The second paper examines the effect of liquidity on corporate bond prices using the newly formed TRACE data set. In the spirit of Acharya and Pedersen's (2005) liquidity-adjusted capital asset pricing model (LCAPM), I examine the impact of multiple sources of risk on corporate bond prices. The results do not lend strong support for the existence of liquidity risk in the corporate bond market or for the LCAPM, especially when liquidity is captured using the trading frequency, trading volume, and turnover. Contrary to the predictions of the LCAPM, more illiquid portfolios do not have higher values for the three liquidity betas; betas that capture the commonality in liquidity with the market, the sensitivity in returns with the market-wide liquidity, and the liquidity sensitivity with the market returns. Furthermore, after running cross-sectional regressions I do not find strong evidence either for the validity of the model or that liquidity risk does matter for the corporate bond prices.
Author: George Theocharides Publisher: ISBN: Category : Languages : en Pages : 288
Book Description
This dissertation consists of twopapers. The first paper examines the propagation of firm-specific shocks as well as market-wide shocks between 1995-2003 using Treasury and corporate bond market data. It then tests the implications of previously proposed models of contagion. I find little support for the industry and counterparty structure hypothesis, suggesting that fundamentals do not generate contagion. Consistent with the information transmission, rebalancing, and liquidity-shock hypotheses, I find evidence of flight to quality during the event periods. However, in contrast to the prediction of the liquidity-shock channel, the corporate bond market, on average, seems to be more liquid during event periods (evidenced by higher trading volume, trading frequency, and mean bond age). Furthermore, there are no significant changes in the trading of assets with the low transaction costs, which is contrary to the rebalancing theory. These findings are more in favor of the correlated information channel as a means of inducing contagion. The second paper examines the effect of liquidity on corporate bond prices using the newly formed TRACE data set. In the spirit of Acharya and Pedersen's (2005) liquidity-adjusted capital asset pricing model (LCAPM), I examine the impact of multiple sources of risk on corporate bond prices. The results do not lend strong support for the existence of liquidity risk in the corporate bond market or for the LCAPM, especially when liquidity is captured using the trading frequency, trading volume, and turnover. Contrary to the predictions of the LCAPM, more illiquid portfolios do not have higher values for the three liquidity betas; betas that capture the commonality in liquidity with the market, the sensitivity in returns with the market-wide liquidity, and the liquidity sensitivity with the market returns. Furthermore, after running cross-sectional regressions I do not find strong evidence either for the validity of the model or that liquidity risk does matter for the corporate bond prices.
Author: Xiaoting Wei Publisher: ISBN: Category : Languages : en Pages : 528
Book Description
This thesis investigates the impact of three corporate events on corporate bond prices in the U.S. Specifically, the first empirical essay examines whether bond prices exhibit delayed reactions to earnings announcements. The second essay examines whether bond prices react to equity analysts' recommendation revisions and the third essay examines whether bond prices react to unexpected dividend changes. The results from the first essay show that the bond price reactions to earnings news are asymmetric, with greater reactions following negative earnings surprises than following positive earnings surprises. This is consistent with the Black-Scholes (1973) bond pricing model. Bond price reactions are also reported to be affected by bond risk. Because issuers of riskier bonds are more likely to face default, earnings news is reported to be more pertinent to the value of riskier bonds.The second essay reports similar asymmetric bond price reactions. The bond price reactions appear to be directed more towards recommendation downgrades than towards upgrades. In addition, riskier bonds tend to exhibit stronger reactions to recommendation revisions than safer bonds do.The third essay documents significant and negative bond price reactions to dividend cuts and the significant reactions of speculative-grade (riskier) bonds to dividend changes. The bond price changes are in the same direction as the dividend changes are, which supports the dividend information content hypothesis rather than the wealth expropriation hypothesis, which would predict opposite bond price reactions.
Author: Paul-Olivier Klein Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
This dissertation studies the corporate bond market. Results emphasize the role of legal environment and governance. The first chapter demonstrates the role of creditors' protection and information on the corporate bond market. It identifies a non-homogenous impact across firms. The second chapter uses a meta-analysis to scrutinize the effect of a bond offering on the firm's value. It stresses the reasons underlying diverging results in the literature so far. The third chapter focuses on the Chinese corporate bond market and highlights the role of state and management ownership on the value created by a bond offering. The fourth chapter isolates a religious bias from professional investors and contributes to the literature on the impact of behavioural biases on the firm's value.
Author: Siamak (Hossein) Javadi Asl Publisher: ISBN: Category : Languages : en Pages : 173
Book Description
Abstract Essay1: This paper examines joint default risk and its bond pricing implications. Constructing a measure of default correlation from CDS data, we show that default correlation is priced in bond market. Default correlation is more pronounced during periods of financial distress and for speculative issues. Also, consistent with theory, we establish a link between default correlation, secondary bond market liquidity, and the overall economic condition. Deterioration in secondary bond market liquidity raises the default boundary across the board and triggers default correlation. Our results provide a direct evidence for an intricate interaction between default risk premium and liquidity risk premium and have significant risk management and policy implications.
Author: Jens Dick-Nielsen Publisher: ISBN: 9788759384473 Category : Languages : en Pages : 122
Book Description
The three essays study the US corporate bond market with special attention to bond liquidity. All essays are empirical studies which rely heavily on the availability of transactions data. Earlier studies had to use quoted bond prices for empirical studies, but with the introduction of the TRACE system and with the following dissemination of transaction prices the data quality on corporate bonds has improved immensely. In the years after 2000 a range of studies assessed the performance of structural credit risk models and found that they were not able to fully explain the size of the average credit spread for corporate bonds. Huang and Huang (2003) suggested (among others) that the remaining non-default-component of the credit spread was an illiquidity premium. Using transaction data this thesis studies the impact of illiquidity and trading frictions on corporate bonds.
Author: George Theocharides
Author: George Theocharides
Author: William Robert Gebhardt
Author: Xiaoting Wei
Author: Paul-Olivier Klein
Author: Fan Chen
Author: Andreas Christian Rapp
Author: Madhu Kalimipalli
Author: Siamak (Hossein) Javadi Asl
Author: Jens Dick-Nielsen
Author: Aino Levonmaa