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Corporate Bond Returns and Volatility
Article first published online: 25 JAN 2008
DOI: 10.1111/j.1540-6288.2007.00184.x
2008, The Eastern Finance Association
Additional Information
How to Cite
Cai, N. and Jiang, X. (2008), Corporate Bond Returns and Volatility. Financial Review, 43: 1–26. doi: 10.1111/j.1540-6288.2007.00184.x
Publication History
- Issue published online: 25 JAN 2008
- Article first published online: 25 JAN 2008
- Abstract
- Article
- References
- Cited By
Keywords:
- corporate bond return;
- volatility;
- decomposition;
- dynamic relation
- G11;
- G12;
- C12;
- C13
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.