An empirical analysis of the relationship of bond yield spreads and macro-economic factors (ABSTRACT)
Athanassakos, G., & Carayannopoulos, P.
published: 2001 | Research publication | Refereed Journals - Finance
Athanassakos, G., & Carayannopoulos, P. (2001). "An empirical analysis of the relationship of bond yield spreads and macro-economic factors". Applied Financial Economics, 11 (2), 197.
ABSTRACT: This study develops and tests a model that explores the relationship between bond yield spreads for various industries, as represented by the spread between corporate and equivalent government bond yields, and the business cycle/economic environment while at the same time controlling for default risk, tax implications and issue traits. The results confirm the typical direct relationship default risk and yield spreads. More importantly, it is found that the impact of the business cycle (macro-economy) on the yield spread of a corporate bond depends on the industry sector to which the issuer of the bond belongs. Thus, while in the industrial sector, bond yield premia are generally higher during recessionary periods, the opposite is true for utilities.
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revised Jan 12/05
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