Corporate Bonds

This paper brings historical evidence to bear on the stylized fact that the yield curve predicts future growth. The spread between corporate bonds and commercial paper reliably predicts future growth over the period 1875-1997. This predictability varies over time, however, particularly across different monetary regimes. In accord with our proposed theory, regimes with low credibility (high persistence of inflation) tend to have better predictability.

This study examines how the formal recognition of lease liabilities required by ASC 842 affects corporate bonds pricing. We document significant bond yield increases with the unexpected offbalance sheet liability revealed by the company. The yield reaction displays an asymmetric pattern, with an increase in yields for previously underestimated operating lease liabilities, but no correction for overestimations. Credit ratings are more likely to be downgraded at firms with severely underestimated operating leases. Collectively, our results suggest that ASC 842 has implications for corporate bond pricing.

Since the Asian financial crisis in 1997-98, policymakers in Asia and the Pacific have put a high priority on bond market development. From 2005 to 2011, the corporate bond market in emerging Asia continued to grow rapidly, even during the 2007-09 crisis. However, during the peak of the crisis, almost all major economies in Asia and the Pacific experienced sharp capital outflows from their domestic bond markets. Credit derivatives and structured credit markets in the region had also exhibited steady growth before 2008, but since then have been slow to develop.

Given a time series data set, you can use automatic time series modeling software to select an appropriate time series model. You can use various statistics to judge how well each candidate model fits the data (in-sample). Likewise, you can use various statistics to select an appropriate model from a list of candidate models (in-sample or out-of-sample or both). Finally, you can use rolling simulations to evaluate ex-ante forecast performance over several forecast origins. This paper demonstrates how you can use SAS ® Forecast Server Procedures and SAS ® Forecast Studio software to perform the statistical analyses that are related to rolling simulations.

The Internet has opened opportunities for efficient on-line trading, and researchers have developed algorithms for various auctions, as well as exchanges for standardized commodities; however, they have done little work on exchanges for complex nonstandard goods. We propose a formal model for trading complex goods, present an exchange system that allows traders to describe purchases and sales by multiple attributes, and give the results of applying it to a used-car market and corporate-bond market.

Among the most important, in my judgment, is the development of alternatives that enable financial systems under stress to maintain an adequate degree of financial intermediation even should their main source of intermediation, whether banks or capital markets, freeze up in a crisis." [Italics are mine.] "Before the crisis broke there was little reason to question the three decades of phenomenally solid East Asian economic growth, largely financed through the banking system, so long as rapidly expanding bank credit outpaced lagging losses and hence depressed the ratio of non-performing loans to total bank assets. The failure to have alternative forms of intermediation was of little consequence so long as the primary means worked. That is, the lack of a spare tyre is of no concern if you do not get a flat. East Asia had no spare tyres. The United States did in 1990 and again in 1998." 2 1.

We present preliminary findings on the liquidity of the government and covered bond markets in Denmark before, during and after the 2008 financial crisis. The analysis focuses on wholesale trading in benchmark bonds in the two markets and is based on an up to now unused transaction level dataset for the period from January 2005 until May 2010. We find that even though trading continued during the crisis, both markets experienced substantial declines in liquidity and significantly increased liquidity risk. Overall, our findings suggest that Danish benchmark covered bonds by and large are as liquid as Danish government bonds during periods of market stress. The findings also suggest that before the crisis government bonds were slightly more liquid than covered bonds in both the short-and longterm market segments. For the period after the crisis, the two markets appear to have had more or less the same level of liquidity for short-term as well as long-term bonds. Before the crisis government bonds were slightly more liquid than covered bonds in both the short-and long-term market segments. For the period after the crisis, the two markets have had more or less the same level of liquidity for both short-and long-term bonds. These conclusions are supported by standard liquidity indicators such as the turnover rate, median trade size, the

We present preliminary findings on the liquidity of the government and covered bond markets in Denmark before, during and after the 2008 financial crisis. The analysis focuses on wholesale trading in benchmark bonds in the two markets and is based on an up to now unused transaction level dataset for the period from January 2005 until May 2010. We find that even though trading continued during the crisis, both markets experienced substantial declines in liquidity and significantly increased liquidity risk. Overall, our findings suggest that Danish benchmark covered bonds by and large are as liquid as Danish government bonds during periods of market stress. The findings also suggest that before the crisis government bonds were slightly more liquid than covered bonds in both the short-and longterm market segments. For the period after the crisis, the two markets appear to have had more or less the same level of liquidity for short-term as well as long-term bonds. Before the crisis government bonds were slightly more liquid than covered bonds in both the short-and long-term market segments. For the period after the crisis, the two markets have had more or less the same level of liquidity for both short-and long-term bonds. These conclusions are supported by standard liquidity indicators such as the turnover rate, median trade size, the

Mutual funds seek to provide investors with exposure to a diversified portfolio of assets at a relatively low cost. Exchange-traded funds are a relatively novel financial tool that has also been proving better suited to investors while requiring lower management costs. Both mutual funds and ETFs are often held for long periods of time. However, another important investment category is that of fixed income securities. Fixed income securities can provide investors with a higher level of predictability and less risk while held to maturity. This text looks into different investment alternatives that can be part of investors' portfolios. Its main purpose is to sort them out according to their different performance as economic conditions evolve over time. The three main purposes for holding investments are consumption smoothing, saving for future investment, and being able to consume on a regular basis once they begin to accumulate savings. The expected results show that changes in market conditions can lead to variations in the performance of investment funds, ETFs, and fixed securities, proving the market to be efficient in a general sense. In volatile markets, mutual funds evaluate different types of risks than ETFs. Bond investments were the ones to provide better results over time, being those that require the lowest degree of management skills. It is also shown that while management fees may affect the performance of funds and ETFs in different ways, market conditions lead to both costs, and when diversification principles are well achieved, they, when taken into consideration by managers, legal restrictions may not be so harmful. Legal constraints do not restrict the free movement of managers to hold portfolios of different securities, and they acquire some degree of protection provided by other members towards their own respective default risks.

School of Economics March 11, 2012 Master's Thesis Antti Myllärinen ISSUER QUALITY AND THE CREDIT CYCLE, EUROPEAN EVIDENCE PURPOSE OF THE STUDY The objective of this thesis is to link patterns of corporate debt financing in Europe to timeseries variation in the pricing of credit risk. The purpose is to show that the credit quality of corporate debt issuers deteriorates during credit booms and this deterioration forecasts low excess returns to corporate bondholders. Further, empirical findings on issuer quality are used to investigate forces driving time-variation in expected corporate bond returns. The data sample includes all public non-financial companies which are headquartered in Europe and have a market capitalization of 100 million euros or more. In addition bond data for German Government Bonds and high yield bond indexes are used. The period when the high yield bond index data has been available, 1998-2011, the annually measured company sample consists of 2,015 companies and 14,143 firm years. Quarterly dataset consists of 1,336 companies and 25,567 individual quarterly observations from January 2001 to September 2011. To test the hypotheses, time-series measures of debt issuer quality are formed. After that several ordinary least square (OLS) regressions are conducted in order to test the validity of the hypotheses. The empirical result of this thesis shows that when issuer quality is low high yield corporate bonds subsequently underperform risk-free German Government Bonds of the same maturity. Decline in issuer quality uncovers a striking degree of predictability and often forecast significantly negative excess bond returns at 3-and 4-year horizons over and above traditional proxies for risk premium. These results are difficult to explain using rationally time-varying risk aversion or other drivers of countercyclical risk premium. Instead the findings suggest that intermediary frictions, investor over-extrapolation and reaching for yield drive variations in required high yield bond returns. Issuer characteristic spread, issuer quality, high yield excess bond returns, European corporate bond markets II Aalto-yliopiston kauppakorkeakoulu Aalto-yliopiston kauppakorkeakoulu Tiivistelmä Pro Gradu -tutkielma 11. maaliskuuta, 2012 Antti Myllärinen ISSUER QUALITY AND THE CREDIT CYCLE, EUROPEAN EVIDENCE TUTKIELMAN TAVOITTEET Tämän pro-gradu tutkielman tavoitteena on selvittää yritysten velanoton ja velan hinnoittelun välistä suhdetta Euroopan talousalueen yhtiöiden keskuudessa. Työssä tutkitaan, kasvaako keskimääräisen velallisen riskisyys taloussuhdanteiden noustessa, alihinnoittelevatko sijoittajat lainaamansa velkarahan kyseisinä ajanjaksoina, ja johtaako mahdollinen alihinnoittelu toistuvasti negatiivisiin ylituottoihin. Lisäksi tutkimuksen päämääränä on löytää syitä mahdolliselle velan alihinnoittelulle. Lähdeaineisto koostuu eurooppalaisten julkisesti noteerattujen markkina-arvoltaan yli 100 miljoonan euron yritysten tilinpäätöstiedoista. Kaikki havainnoidut yritykset toimivat muilla kuin rahoitusalalla tai julkispalveluissa. Lisäksi tutkimuksessa käytetään Saksan valtion joukkovelkakirjalainojen ja korkeariskisten yritysten joukkovelkakirjalainaindeksien (kansankielessä roskalainat) aikasarjoja. Eurooppalaisten roskalainamarkkinoiden myöhäisen kehittymisen vuoksi tutkimuksen aikasarja ulottuu vuodesta 1998 vuoden 2011 syyskuulle. Empiirinen tutkimus suoritetaan ensisijaisesti vertailemalla suhteellisesti paljon ja vähän nettovelkaa kasvattavien yritysten konkurssiriskien eroja. Toinen laatumittari on roskalainojen osuus kaikista liikkeelle lasketuista pörssilistattujen yritysten joukkovelkakirjalainoista. Tulokset osoittavat, että niiden ajanjaksojen jälkeen, jolloin velan liikkeellelaskijoiden suhteellinen riskisyys on kasvanut, riskisempien yritysten joukkovelkakirjojojen haltijat saavat sijoituksilleen toistuvasti negatiivista ylituottoa. Ylituotto määritellään tässä yhteydessä Saksan valtionlainojen tuoton ylittäväksi osaksi. Löydetty korrelaatio velallisen riskisyyden ja joukkovelkojen keskipitkän aikavälin (3-4 vuotta) tuottojen välillä on merkittävä ja vaikeasti selitettävissä ainoastaan perinteisiä tuottoa ennustavia mittareita käyttämällä. Sen sijaan tulokset viittaavat siihen, että sijoittajien liiallisella itsevarmuudella, tuoton tavoittelulla ja rahoituksen välittäjien (mm. pankit, vakuutusyhtiöt) roolilla on merkittävä osuus löydettyjen ilmiöiden selittämisessä. Velan liikkeellelaskijoiden laatu, velan liikkeellelaskijoiden riskisyys, roskalainojen ylituotot, Eurooppalaiset joukkovelkakirjamarkkinat III

Using a sample of 356 U.S. non-financial firms from 2002 to 2011, we derive endogenous systematic credit risk and Credit Default Swap (CDS) illiquidity factors, and show that they dominate firm-specific and exogenous market factors as determinants of individual firms' CDS spreads. Our model performs well for cross-sectional predictions and can be used for estimating CDS spreads for firms that do not have traded CDSs. Our findings question Basel III's adoption of CDS-implied probability for counterparty risk management, as CDS spread is not a pure individual firm default risk measure devoid of market credit and illiquidity premia.

Seasoned equity offerings (SEOs) executed through accelerated underwritings have increased global market share recently, raising over $850 billion since 1998, and now account for over half (two-thirds) of the value of U.S. (European) SEOs. We examine 31,242 global SEOs, executed during 1991-2004, which raise over $2.9 trillion for firms and selling shareholders. Compared to fully marketed deals, accelerated offerings occur more rapidly, raise more money, and require fewer underwriters. Importantly, accelerated deals reduce total issuance cost by about 250 basis points. Accelerated deals sell equal fractions of primary and secondary shares, whereas in traditional SEOs primary shares dominate. Announcement period returns are comparable for traditional and accelerated offerings, while secondary and mixed offerings trigger more negative market responses than do primary offerings. We conclude that this rapid, worldwide shift towards accelerated underwriting creates a spot market for SEOs, and represents the long-predicted shift towards an auction model for seasoned equity sales.

This study aims to investigate the effect of bond issuance announcements and to determine the company characteristics that could influence this effect. The findings reveal positive cumulative average abnormal returns following bond issuances, indicating that the market considers bond offers to be favorable news. Nevertheless, cross-sectional regression analysis shows an insignificant relation of company profitability, growth opportunities, asset tangibility, size, and managerial ownership with cumulative abnormal returns. The results confirm that there is a signaling effect of bond issuance announcements and that this effect is not affected by company characteristics.

The emergence in the 1990s of a nascent project bond Much of the recent work relating to the role of market to fund long-term infrastructure projects in contractual covenants to the determination of bond developing countries merits attention. Dailami and prices has focused on the U.S. corporate bond market Hauswald compile .tailed information on a sample of with its unique bankruptcy code (Chapter 11) and well 105 bonds issued between January 1993 and March developed legal framework, recognizing the bond 2002 for financing infr-'lcrr.. projects in developing contract as the sole instrument of defining the rights and countries, document their contractual covenants, and duties of various parties. In circumstances in which the analyze their pricing determinants. They find that on underpinning legal and institutional frameworks average, project bonds are issued at approximately 300 governing contract formation and enforcement are not basis points above U.S. Treasury securities, have a well developed, the link between bond pricing and legal surprisingly high issue size of US$278 million, a maturity framework becomes important. This finding is confirmed of slightly under 12 years, and are rated slightly below by the authors' econometric analysis of project bond investment grade. In terms of geographic origin, projects pricing model. So, investors take into account the quality in Asia and Latin America have issued more bonds than of the host country's legal framework and reward those located in other regions. projects located in countries that adhere to the rule of law with tighter credit spreads and lower funding costs. This paper-a product of the Development Prospects Group-is part of a larger effort in the group to promote a healthy flow of investment capital to developing countries' infrastructure. Copies of the paper are available free from the World Bank,

for research assistance. We also thank a number of practitioners for answering our questions about how this market works. Finally, we thank the Q Group for their financial support. The views and opinions expressed do not necessarily reflect those of State Street Corporation or the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

This paper provides the first comprehensive documentation of the main features of corporate bond issues in domestic and international markets and analyzes how firms use these markets after they internationalize. We find that debt issues in domestic and international bond markets have different characteristics, not explained by differences across firms or their country of origin. International issues tend to be larger, of shorter maturity, denominated in foreign currency, and include a higher fraction of fixed rate contracts. Moreover, a large proportion of firms remain active in domestic bond markets after accessing international markets, and many of these firms use both markets for different types of issues. This evidence suggests that domestic and international bond markets provide different financial services and are not substitutes, but but rather complements.

This paper describes the market for borrowing corporate bonds using a comprehensive dataset from a major lender. The cost of borrowing corporate bonds is comparable to the cost of borrowing stock, between 10 and 20 basis points, and both have fallen over time. Factors that influence borrowing costs are loan size, percentage of inventory lent, rating, and borrower identity. There is no evidence that bond short sellers have private information. Bonds with CDS contracts are more actively lent than those without. Finally, the 2007 Credit Crunch does not affect average borrowing costs or loan volume, but does increase borrowing cost variance.

This study aims to investigate the effect of bond issuance announcements and to determine the company characteristics that could influence this effect. The findings reveal positive cumulative average abnormal returns following bond issuances, indicating that the market considers bond offers to be favorable news. Nevertheless, cross-sectional regression analysis shows an insignificant relation of company profitability, growth opportunities, asset tangibility, size, and managerial ownership with cumulative abnormal returns. The results confirm that there is a signaling effect of bond issuance announcements and that this effect is not affected by company characteristics. the corporate debt market due to the over-reliance of the private sector on bank borrowings. The National Mortgage Corporation, Cagamas Bhd, was set up to provide liquidity assistance to banks so that affordable housing loans could be extended by the central bank or Bank Negara Malaysia (BNM) in December

Using a dataset of Japanese firms from the latter half of the 1990s to 2010, we conduct an analysis of the determinants of the funding through initial public offerings (IPOs) by non-listed companies, and the funding through seasoned equity offerings (SEOs) and bond issues by listed companies, as well as the post-funding firm behavior. Our analysis of IPOs shows that firms with higher profitability and soundness are more likely to conduct IPOs, and that the firms that have undertaken IPOs have significantly increased their capital investment and research and development (R&D) activities compared with those that have not. Our results suggest that firms conduct IPOs not only with a view to capitalizing on share mispricing but also to funding their capital investments and R&D activities. Our analysis of SEOs and bond issues by listed companies shows that firms with higher book-to-market ratios and higher leverage ratios issue more equities than bonds and loans, while those with high sales growth rates and higher default probabilities issue more bonds than equities and loans. Our results of equity issues are consistent with the market timing (mispricing) hypothesis as well as the existent theoretical hypothesis of capital structure (the tradeoff and the pecking order hypotheses). On the other hand, while our results of bond issues are consistent with the bank holdup hypothesis, they do not support a hypothesis that stresses the role of banks in renegotiation. Finally, our analysis of the post-funding investment behavior by listed companies shows that bond issues significantly increase firms' capital investments, while the effects of SEOs on capital investments and R&D activities are either insignificant or significant with a limited scale.

This present paper provides both theoretical and empirical analyses of multi-factor joint affine term structure models (JATSMs) in explaining the co-movements of international term structure slopes. We extend the single-country affine term structure models of Dai and Singleton (2000) to a two-country setup. Using the efficient method of moments and reprojection analysis, we find that a JATSM with two square-root factors and one Gaussian factor performs best in capturing the correlation between the US and the UK term structure slopes.

BIS Working Papers are written by members of the Monetary and Economic Department of the Bank for International Settlements, and from time to time by other economists, and are published by the Bank. The views expressed in them are those of their authors and not necessarily the views of the BIS.

In this paper, we provide a novel rationale for credit ratings. The rationale that we propose is that credit ratings can serve as a coordinating mechanism in situations where multiple equilibria can obtain. We show that credit ratings provide a "focal point" for firms and their investors. We explore the vital, but previously overlooked implicit contractual relationship between a credit rating agency and a firm. Credit ratings can help fix the desired equilibrium and as such play an economically meaningful role. Our model provides several empirical predictions and insights regarding the expected price impact of ratings changes, the discreteness in funding cost changes, and the effect of the focus of organizations on the efficacy of credit ratings.

Bu çalışmada Türk bankacılık sektöründeki vergi planlaması etkinliğinin hem Nakit Efektif Vergi Oranı hem de Genel Kabul Görmüş Muhasebe Prensipleri Efektif Vergi Oranına göre hesaplanarak elde edilen ekonometrik model ile tahmin edilmesi amaçlanmıştır. Böylelikle, Türk bankacılığında vergi planlamasının yapılmasından hangi faktörlerin etkili olduğunun ortaya konulması hedeflenmiştir. Bu amaç kapsamında, bankacılık sektöründe 2015-2020 dönem aralığı içerisinde faaliyet gösteren kamu, özel ve yabancı sermayeli 16 bankanın finansal verileri kullanılarak iki farklı vergi planlaması modeli ile lojistik regresyon analizi yapılmıştır. Elde edilen bulgular, Nakit Efektif Vergi Oranı vergi planlamasına göre 16 bankadaki vergi planlaması ile faiz gelirleri, şube sayısı, faiz gelirleri, nakit ödemesi, sektör hesabı ve kaldıraç verileri arasında anlamlı ilişki olduğu tespit edilmiştir. Genel Kabul Görmüş Muhasebe Prensipleri Efektif Vergi Oranı vergi planlamasına göre ise faiz gelirleri, personel sayısı, banka karlılığı, vergi karşılığı, vergi öncesi gelir ve sektör payı verileri ile vergi planlaması arasında anlamlı bir ilişki olduğu tespit edilmiştir.

The fight against climate change has given rise to innovative financial instruments, with transition bonds emerging as a crucial tool for supporting companies transitioning from high-carbon to low-carbon practices. While green bonds have traditionally dominated the sustainable finance landscape, transition bonds offer a distinct avenue for industries that are on the journey towards sustainability but are not yet fully aligned with green finance standards. This article provides a comprehensive examination of transition bonds, contrasting them with green bonds in terms of structure, purpose, and market implications. Furthermore, it explores the role of both bond types in addressing the broader challenges of decarbonization and the shift towards net-zero economies.

Applied to the European markets, this paper analyzes the price of credit risk on the Credit Default Swap (CDS) and corporate bond markets by comparing the sensitivity of the credit spreads on each market to systematic, idiosyncratic risk factors and liquidity. Our analysis confirms ...

This paper brings historical evidence to bear on the stylized fact that the yield curve predicts future growth. The spread between corporate bonds and commercial paper reliably predicts future growth over the period 1875-1997. This predictability varies over time, however, particularly across different monetary regimes. In accord with our proposed theory, regimes with low credibility (high persistence of inflation) tend to have better predictability.

This paper introduces the Dynamic Stability Portfolio, an investment strategy designed to offer long-term financial stability and growth regardless of market conditions. It aims to make investing accessible to beginners by specifying the assets and ETFs required for constructing a personal portfolio. The strategy addresses common challenges faced by novice investors, such as emotional decision-making and market complexity and is inspired by Ray Dalio's Bridgewater Associates Pure Alpha 1 Strategy, which may also provide valuable insights for advanced investors. The portfolio consists of a diversified mix of ETFs across four asset classes: Equity, Real Estate (REITs), Gold (ETCs), and Government Bonds. Key benefits include simplicity, accessibility, stability, and growth potential, with minimal management and substantial long-term returns through compounding while maintaining low ongoing costs. Additionally, the paper offers a concise overview of monetary history, the financial system and examines the role of bitcoin in the current economic landscape, providing a comprehensive context for understanding the strategy's relevance. Limitations include reliance on historical data, assumptions about risk tolerance, and the potential for changes in economic conditions that may affect the strategy's effectiveness.

The purpose of this study is to show the importance of using project finance in infrastructure investments in developing countries. The paper will be focused only on one infrastructure sector, which is energy. Structurally, power project finance has involved largely buildown-transfer (BOT) project structures and long-term contracts. The projects largely reflect a rational allocation of risks among public and private participants. Private sponsors and lenders generally assume risks for completion and performance. Governments assume substantial risks in nearly all projects, mostly in areas in which they have control, such as utility performance, currency convertibility, fuel costs, inflation, and political event. The aim of this research is to empirically examine a financing and governance structure called Project Finance that typically funds large scale, capital intensive, infrastructure investments in risky countries. The methodology used in this paper is literature review of the ma...

This study investigates the determinants of trading activity in the U.S. corporate bond market, focusing on the effects of Seasonal Affective Disorder (SAD) and macroeconomic announcements. Employing the General-to-Specific (Gets) Autometrics methodology, we identify distinct behavioral responses between retail and institutional investors to SAD, noting a significant impact on retail trading volumes but not on institutional trading or bond returns. This discovery extends the understanding of behavioral finance within the context of bond markets, diverging from established findings in equity and Treasury markets. Additionally, our analysis delineates the influence of macroeconomic announcements on trading activities, offering new insights into the market's reaction to economic news. This study's findings contribute to the broader literature on market microstructure and behavioral finance, providing empirical evidence on the interplay between psychological factors and macroeconomic information flow within corporate bond markets. By addressing these specific aspects with rigorous econometric techniques, our research enhances the comprehension of trading dynamics in less transparent markets, offering valuable perspectives for academics, investors, risk managers, and policymakers.

We analyse the impact of monetary policy on the shape of the corporate yield curve and credit spread using a macro-finance approach. Instead of estimating the latent factors from the data on corporate bonds, we use market proxies of level, slope and curvature of the corporate yield curve and credit spread. The results demonstrate that while monetary policy has the dominant impact among macroeconomic variables on the entire term structure, it is particularly strong at the short end and on credit spreads. Changes in credit spreads, in turn, also influence monetary policy. The results are robust to alternative identification schemes and have important policy implications for further development of the corporate bond market, particularly in emerging market economies.

We analyse the impact of monetary policy on the shape of the corporate yield curve and credit spread using a macro-finance approach. Instead of estimating the latent factors from the data on corporate bonds, we use market proxies of level, slope and curvature of the corporate yield curve and credit spread. The results demonstrate that while monetary policy has the dominant impact among macroeconomic variables on the entire term structure, it is particularly strong at the short end and on credit spreads. Changes in credit spreads, in turn, also influence monetary policy. The results are robust to alternative identification schemes and have important policy implications for further development of the corporate bond market, particularly in emerging market economies.

Highlights  We analyze the conditional correlations and volatility linkages between sukuk (Islamic bonds) and conventional bond markets.  We also investigate the elements affecting co-movement paths and the determinants of sukuk-corporate bond dynamic conditional correlation changes.  We find lower dynamic conditional correlations between sukuk and the US and European bond markets, but increase volatility linkages during shocks.  The benefits of international diversification across sukuk and bonds tend to decrease significantly during periods of high volatility.  We unveil the strong impact on co-movement paths of oil prices, US credit event information, stock market uncertainty and liquidity shocks.

In this study, we examine the effect of mutual fund connections, through managerial sharing, on performance and stock holding commonalities. Our analysis of return correlations and portfolio holdings indicates that more interconnected funds tend to buy and sell similar stocks, hence increasing the similarity of portfolio holdings and undermining the distinctiveness of their investment strategy. Our results also indicate that highly connected funds significantly underperform weakly connected funds by about 1.4% on a yearly risk-adjusted basis. We show that fund family performance is unaffected by the intensity of fund connections, and that greater fund connections could significantly enhance family-level profit margins. JEL classification: G11; G12; G23 * We would like to thank Adrian Lee, Marco Navone, Nahid Rahman, Susan Thorp, and two anonymous reviewers for helpful comments. Casavecchia gratefully acknowledges the financial support received from the Finance Discipline Group and the Quantitative Finance Research Centre at the University of Technology Sydney. We acknowledge the technical support provided by Analytic Technologies and the UTS FEIT High-Performance Parallel Computing Linux Clusters for the use of their supercomputers. The opinion and analysis presented herein are those of the authors and do not represent the views of GMO.

This paper develops a two-dimensional structural framework for valuing credit default swaps and corporate bonds in the presence of default contagion. Modelling the values of related firms as correlated geometric Brownian motions with exponential default barriers, analytical formulae are obtained for both credit default swap spreads and corporate bond yields. The credit dependence structure is influenced by both a longer-term correlation structure as well as by the possibility of default contagion. In this way, the model is able to generate a diverse range of shapes for the term structure of credit spreads using realistic values for input parameters.

Beta katsayısı, bir işletmenin hisse senetlerine ait getirilerin pazar endeksinin getirilerine olan duyarlılığını ölçmede kullanılan bir araçtır. Beta katsayısının 1'den büyük olması duyarlılık derecesinin yüksek, 1'den küçük olması ise, duyarlılık derecesinin düşük olduğu anlamına gelmektedir. Anlaşılacağı üzere, beta katsayısı bir risk ölçüsüdür. Pazar endeksine duyarlılığı yüksek olan hisse senetleri, duyarlılığı düşük olanlara göre daha risklidir. Bir işletmenin finansal oranlarının bazıları da o firmanın riskliliğini ölçmede kullanılabilir. Likidite ve kârlılık oranları düşük, borçluluk oranları yüksek olan bir işletme riski yüksek, oranları bunun tersi durumunda olan bir işletme ise, riski düşük olarak nitelendirilebilir. Bu çalışmanın amacı, bir risk ölçüsü olan beta katsayısı ile yine risk göstergesi olan bazı finansal oranlar arasında bir ilişkinin olup olmadığının ortaya konmasıdır. Bu amaçla İstanbul Menkul Kıymetler Borsası'nda (İMKB) işlem gören 167 işletmen...

This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. This study explores the determinants of corporate bond spreads in emerging markets economies. Using a largely unexploited dataset, the paper finds that corporate bond spreads are determined by firm-specific variables, bond characteristics, macroeconomic conditions, sovereign risk, and global factors. A variance decomposition analysis shows that firm-level characteristics account for the larger share of the variance. In addition, the paper finds two asymmetries. The first is in line with the sovereign ceiling "lite" hypothesis which states that the transfer of risk from the sovereign to the private sector is less than 1 to 1. The second is consistent with the popular notion that panics are common in emerging markets where investors are less informed and more prone to herding.

Using novel data on investors' bond portfolios, we study the contagion of the crisis from securitized bonds to corporate bonds. When securitized bonds became ''toxic'' in August 2007, mutual funds retained the now illiquid securitized bonds and sold corporate bonds. Funds with negative flows or high liquidity needs liquidated more than others. Yield spreads increased more for corporate bonds whose pre-crisis bondholders were more heavily exposed to securitized bonds, compared to same-issuer bonds held by unexposed investors. The findings suggest that liquidity-constrained investors with exposure to securitized bonds played a role in propagating the crisis from securitized to corporate bonds.

The security, credibility and growth of a country, corporation or product are many times measured by ratings given for certain entities, for instance, the risk notations periodically published by major rating agencies. As a matter of fact, the review of the 2007/2008 financial crisis causes, consequently we can state that their ratings had some correction problems that would be mani corporate and countries investment risk. To develop our research, we chose to analyze the political and credit risk. Considering the extremely volatile political risk, it would occur in an unexpected concern, as well as, would be supported in a revolution or in riots, and, it would be a change through a Government change and/or laws changes implemented.

This paper describes the market for borrowing corporate bonds using a comprehensive dataset from a major lender. The cost of borrowing corporate bonds is comparable to the cost of borrowing stock, between 10 and 20 basis points, and both have fallen over time. Factors that influence borrowing costs are loan size, percentage of inventory lent, rating, and borrower identity. There is no evidence that bond short sellers have private information. Bonds with CDS contracts are more actively lent than those without. Finally, the 2007 Credit Crunch does not affect average borrowing costs or loan volume, but does increase borrowing cost variance.

This paper finds significant price momentum in US corporate bonds. The analysis is based on 3.2 million monthly observations from 77,150 bonds from two transaction and three dealer-quote databases over the period from 1973 to 2008. Bond momentum profits are significant in the second half of the sample period, 1991 to 2008, and amount to 64 basis points per month. Momentum strategies are only profitable among non-investment grade bonds, where they yield 190 basis points per month. Similar to recent findings in equities, profits disappear after removing the worst-rated bonds-about 8% of all observations. Contrary to equities, bond momentum profits derive primarily from winners. However, losers trade more than winners, giving them a greater share in momentum profitability in tradebased data. Our findings do not support market opaqueness, illiquidity, investor under-reaction, and systematic risk as explanations of corporate bond momentum.

The purpose of this study are: First, to analyze is there any significant influence among debt ratio, internal capital, cash flow, inflation expectations and the expectations of rupiah exchange rate against the decisions of businessmen in the real sector to invest or not to invest; Second, to analyze the impact of the variables perception mortgage interest rates, perceptions of bank regulation, internal capital and cash flow on debt ratio of the real sector (leverage). Investment decision model is estimated using logit models. The results of regression estimates the overall good for business and risk analysis for financial risk shows that almost all explanatory variables in the equation are statistically significant. There are three variables have a positive influence on the investment decisions taken by the businesses i.e. the debt ratio, cash flow and exchange rate expectations.

This study investigates the impact of corporate bonds issued by Greek listed firms on employment. Even though external financing and the effects on employment has been studied in the literature, we extend the existing literature by focusing for the first time on the specific role of corporate bonds on employment. We have collected all the relevant papers on this line of the literature and concisely report them in a table format and then use them in analyzing our results. Our empirical analysis is based on a panel dataset from 2001 to 2014 and we examine the effect of corporate bonds in the pre and post period of the Greek economic crisis, in which the banking system is vulnerable and unable to provide financing to the firms. The results suggest that corporate bonds have a positive effect on employment in the pre-crisis sample, denoting that firms hire employees and proceed to investment choices. On the contrary, during the recession, corporate bonds have a negative effect on employm...

A popular view is that buyout groups are focused on short-term improvements in operations and wealth redistribution at the expense of long-term value creation. Using bonds offered during 1983-2009 by firms after their initial public offerings (IPOs), we examine the effects of buyout groups (private equity firms) on bond yield spreads, credit ratings, and bond issuers' dividend and investment decisions. We find that yield spreads on bonds offered after the IPO by buyout-backed IPO firms are on average 67 basis points lower than those on bonds by other IPO firms, after controlling for other issuer and issue risk attributes, in spite of the fact that bond ratings by both Standard & Poor's and Moody's are unrelated to whether the issuer's IPO was buyout-backed. We also provide evidence that buyout-backed IPO firms are less likely to pay dividends and that they invest less than other IPO firms in the fiscal years of bond offerings. Our findings suggest that the reputational concerns of buyout groups help their portfolio firms reduce the agency costs of debt.