News and the Cross-Section of Corporate Bond Returns

A. Abhyankar, A. Gonzalez

Research output: Contribution to journalArticlepeer-review

Abstract

We study the cross-section of expected corporate bond returns using an inter-temporal CAPM (ICAPM) with three-factors: innovations in future excess bond returns, future real interest rates and future expected inflation. Our test assets are a broad range of corporate bond market index portfolios. We find that two factors – innovations about future inflation and innovations about future real interest rates – explain the cross-section of expected corporate bond returns in our sample. Our model provides an alternative to the ad hoc risk factor models used, for example, in evaluating the performance of bond mutual funds.
Original languageEnglish
Pages (from-to)996-1004
Number of pages9
JournalJournal of Banking and Finance
Volume33
Issue number6
DOIs
Publication statusPublished - 2009

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