Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/162824 
Year of Publication: 
2017
Series/Report no.: 
CFR Working Paper No. 17-03
Publisher: 
University of Cologne, Centre for Financial Research (CFR), Cologne
Abstract: 
We evaluate how different betas and characteristics related to default, term, and liquidity risk fare against one another in explaining the cross-section of corporate bond returns. We find that characteristics-credit rating, duration, and Amihud illiquidity measure-fare better. Yields add incremental explanatory power. Consistent with yields providing a timelier assessment of default risk than ratings, bonds with higher yields but similar credit ratings, durations and Amihud measures experience more subsequent ratings downgrades, fewer upgrades, and a higher frequency of defaults. Based on our findings, we present characteristic portfolios that can be used to benchmark individual bond and portfolio returns.
Document Type: 
Working Paper

Files in This Item:
File
Size
907.35 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.