Informed Bond Trading, Corporate Yield Spreads, and Corporate Default Prediction

• 成果类型: Article
• 署名作者: Han, Song; Zhou, Xing
• 署名单位: Federal Reserve System - USA; Federal Reserve System Board of Governors; Rutgers University System; Rutgers University New Brunswick
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2013.1768
• 发表日期: 2014
• 页码: 675-694
• 关键词: corporate bond yield spreads; information asymmetry; information risk premium; Credit risk; corporate default prediction

摘要

Taking advantage of recently augmented corporate bond transaction data, we examine the pricing implications of informed trading in corporate bonds and its ability to predict corporate defaults. We find that microstructure measures of information asymmetry seem to capture adverse selection in corporate bond trading reasonably well. We demonstrate that information asymmetry in bond trading has explanatory power for corporate bond yield spreads, and this result holds after controlling for the transaction costs of liquidity, credit risk, and other traditional bond pricing factors. Furthermore, information asymmetry can help forecast corporate defaults after conditioning on other default prediction variables. Such forecasting ability of informed bond trading is especially useful for private firms because the bond market constitutes the only venue for informed traders to exploit their information advantages.