Abstract

http://ssrn.com/abstract=997821
 
 

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Initial Evidence on the Role of Accounting Earnings in the Bond Market


Peter D. Easton


University of Notre Dame - Department of Accountancy

Steven J. Monahan


INSEAD

Florin P. Vasvari


London Business School

December 1, 2008


Abstract:     
We document that: (1) the incidence of bond trade increases during the days surrounding earnings announcements; (2) there is a bond-price reaction to the announcement of earnings; and (3) there is a positive association between annual bond returns and both annual changes in earnings and annual analysts' forecast errors. All of these effects are larger when earnings convey bad news or when the underlying bond is more risky. Taken together, our results suggest that the nonlinear payoff structure of bond securities affects the role of accounting earnings in the bond market

Number of Pages in PDF File: 63

Keywords: Bond Returns, Bond Trade, Earnings, Losses and Call Option

JEL Classification: G12, G32, M41, G34

working papers series


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Date posted: July 7, 2007 ; Last revised: January 26, 2009

Suggested Citation

Easton, Peter D. and Monahan, Steven J. and Vasvari, Florin P., Initial Evidence on the Role of Accounting Earnings in the Bond Market (December 1, 2008). Available at SSRN: http://ssrn.com/abstract=997821 or http://dx.doi.org/10.2139/ssrn.997821

Contact Information

Peter D. Easton
University of Notre Dame - Department of Accountancy ( email )
Mendoza College of Business
Notre Dame, IN 46556-5646
United States
574-631-6096 (Phone)
574-631-5127 (Fax)
Steven J. Monahan (Contact Author)
INSEAD ( email )
Boulevard de Constance
PMLS 1.24
F-7705 Fontainebleau Cedex, 77305
France
+33 1 60 72 92 14 (Phone)
+33 1 60 72 92 53 (Fax)
HOME PAGE: http://www.insead.edu/facultyresearch/faculty/profiles/smonahan/

INSEAD Logo

Florin P. Vasvari
London Business School ( email )
Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom
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