Corporate Bond Returns and Volatility

38 Pages Posted: 21 Nov 2007

See all articles by Kelly Nianyun Cai

Kelly Nianyun Cai

University of Michigan at Dearborn - School of Management

Xiaoquan Jiang

Florida International University (FIU) - Department of Finance

Multiple version iconThere are 3 versions of this paper

Abstract

Recent literature emphasizes the relation of stock volatility to corporate bond yields. We demonstrate that during 1996-2005 corporate bond excess return volatility is directly related to contemporaneous corporate bond excess returns. In fact, the decompositions of aggregate bond volatility have a higher contemporaneous correlation with bond yields in comparison to idiosyncratic stock risk. Additionally, bond volatility and idiosyncratic risk are significant predictors of corporate three-month and six-month ahead bond excess returns. We also find that corporate bond volatility contains both slow moving and time-varying components.

Keywords: Corporate bond return, volatility, decomposition, dynamic relation

JEL Classification: G11, G12, C12, C13

Suggested Citation

Cai, Kelly Nianyun and Jiang, Xiaoquan, Corporate Bond Returns and Volatility. The Financial Review, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1031525

Kelly Nianyun Cai

University of Michigan at Dearborn - School of Management ( email )

19000 Hubbard Dr.
Dearborn, MI 48126
United States

Xiaoquan Jiang (Contact Author)

Florida International University (FIU) - Department of Finance ( email )

University Park
11200 SW 8th Street
Miami, FL 33199
United States

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