Economic links from bonds and cross-stock return predictability

• 成果类型: Article
• 署名作者: Feng, Jian; Huo, Xiaolin; Liu, Xin; Mao, Yifei; Xiang, Hong
• 署名单位: Peking University; Peking University Shenzhen Graduate School (PKU Shenzhen); University of Hong Kong; University of International Business & Economics; University of Macau; Santa Clara University; Hong Kong Polytechnic University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2025.104110
• 发表日期: 2025
• 关键词: market segmentation; Cross-asset information spillover; Economic linkage; Cross-firm return predictability; Bond rating comovement

摘要

Identifying firms' bond-market-specific economic links through credit-rating comovement of their corporate bonds, a long-short strategy for stocks based on these links generates a risk-adjusted alpha of 0.45% per month, which cannot be explained by existing economic links in the literature. Market segmentation between the equity and bond markets appears to be the underlying mechanism: (i) The cross-return predictability is muted in the bond market; (ii) The cross-return predictability is mitigated in the presence of cross-holding investors; (iii) Equity analysts slowly incorporate information from rating-comovement links to their forecasts.