Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/80833
Authors: 
Simmons-Süer, Banu
Year of Publication: 
2013
Series/Report no.: 
KOF Working Papers, KOF Swiss Economic Institute, ETH Zurich 328
Abstract: 
This paper attempts to find an aggregate leading indicator to predict the spreads observed for high-yield (HY) bond indices. Using a vector error correction (VEC) specification for quarterly data, we establish a long-term equilibrium relationship between the HY market spreads and its determinants, which stem from the interaction between the loan market via the banking sector and the HY market. The paper also attempts to explain the dynamic behavior of spreads by approximating the factors behind the credit and liquidity risk components. The out-of-sample forecasting properties of the resultant econometric model are shown to be superior to naive models.
JEL: 
G12
G15
G17
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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