Common factors in the performance of european corporate bonds - evidence before and after the financial crisis

Aussenegg, Wolfgang, Goetz, Lukas and Jelic, Ranko (2015) Common factors in the performance of european corporate bonds - evidence before and after the financial crisis. European Financial Management. ISSN 1354-7798

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Abstract

We examine monthly excess returns for 23 Euro-denominated corporate bond indices and propose a new specification for bond asset pricing models. Specifically, we separate level and slope components of term and default risk factors and examine liquidity risk. Our results suggest that level and slope risk factors, derived from complete interest rate and default spread term structures, significantly improve the explanatory power of the Fama and French (1993) 2-factor model. We also demonstrate different sensitivities of risk factors before and after recent financial crisis. The results are robust to calendar seasonality and the consideration of equity market returns. © 2013 Blackwell Publishing Ltd.

Item Type: Article
Keywords: asset pricing, Euro corporate bonds, factor models, financial crisis, anomalies
Schools and Departments: School of Business, Management and Economics > Business and Management
Subjects: H Social Sciences > HG Finance > HG3810 Foreign exchange. International finance. International monetary system
Depositing User: Ranko Jelic
Date Deposited: 15 Dec 2014 11:59
Last Modified: 05 Jul 2016 13:11
URI: http://sro.sussex.ac.uk/id/eprint/51683
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