Corporate Bond Risk and Real Activity
Author | : Mr.Jorge A. Chan-Lau |
Publisher | : INTERNATIONAL MONETARY FUND |
Total Pages | : 0 |
Release | : 2001-10-01 |
ISBN-10 | : 1451857586 |
ISBN-13 | : 9781451857580 |
Rating | : 4/5 (86 Downloads) |
Download or read book Corporate Bond Risk and Real Activity written by Mr.Jorge A. Chan-Lau and published by INTERNATIONAL MONETARY FUND. This book was released on 2001-10-01 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper finds that the yield spread of investment-grade bonds relative to Treasuries, a proxy of default risk, predicts marginal changes in industrial production in the United States up to 12 months in the future, even upon controlling for a commonly used predictor such as the commercial paper spread. The paper also finds that systematic risk factors associated with the yield spread of investment-grade bonds to a variety of risk-free benchmarks - Treasuries, agency bonds, and AAA-rated bonds - have significant predictive content for future growth rate of industrial production at 3 to 18 months forecasting horizon, both in- and out-of-sample. Finally, a regime-switching estimation shows that the systematic risk component is also able to capture "industrial production business cycle" well.