Testing the Credit Market Timing Hypothesis Using Counterfactual Issuing Dates

50 Pages Posted: 28 Aug 2013 Last revised: 12 May 2019

See all articles by Murray Z. Frank

Murray Z. Frank

University of Minnesota

Pedram Nezafat

Michigan State University

Date Written: May 10, 2019

Abstract

Do bond issuers successfully time the market? To answer this question, we compare market conditions on an issue day with conditions on days in a window around the issue day. We find that compared with windows of 21 days around issue days, bond issuers time the risk-free rate better than pure chance, with an average gain of 8 basis points; bond issuers also time the CDS spread better than pure chance, with an average gain of 12 basis points. Issuers who issue bonds more frequently do better than less frequent issuers do. Both risk-free rates and CDS spreads are lower on days when shelf-registered bonds are issued than they are on the days surrounding the issue days. Only CDS spreads are lower on days when privately placed bonds are issued.

Keywords: Credit Marking Timing, Market Timing Hypothesis, Behavioral Finance, Bond Market, CDS Market

JEL Classification: G14, G02, G10

Suggested Citation

Frank, Murray Z. and Nezafat, Pedram, Testing the Credit Market Timing Hypothesis Using Counterfactual Issuing Dates (May 10, 2019). Available at SSRN: https://ssrn.com/abstract=2316301 or http://dx.doi.org/10.2139/ssrn.2316301

Murray Z. Frank

University of Minnesota ( email )

Carlson School of Management
321 19th Avenue South
Minneapolis, MN 55455
United States
612-625-5678 (Phone)

Pedram Nezafat (Contact Author)

Michigan State University ( email )

MI
United States

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