Modeling Corporate Bond Returns

• 成果类型: Article
• 署名作者: Kelly, Bryan; Palhares, Diogo; Pruitt, Seth
• 署名单位: Yale University; National Bureau of Economic Research; Arizona State University; Arizona State University-Tempe; Arizona State University; Arizona State University-Tempe
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.13233
• 发表日期: 2023
• 页码: 1967-2008
• 关键词: COMMON RISK-FACTORS; cross-section; conditional capm; volatility; momentum; SPREAD; equity; MARKETS

摘要

We propose a conditional factor model for corporate bond returns with five factors and time-varying factor loadings. We have three main empirical findings. First, our factor model excels in describing the risks and returns of corporate bonds, improving over previously proposed models in the literature by a large margin. Second, our model recommends a systematic bond investment portfolio whose high out-of-sample Sharpe ratio suggests that the credit risk premium is notably larger than previously estimated. Third, we find closer integration between debt and equity markets than found in prior literature.