The riskiness of corporate bonds

Marco Taboga ()
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Marco Taboga: Bank of Italy

No 730, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: When the riskiness of an asset increases, then, arguably, some risk-averse agents that were previously willing to hold on to the asset are no longer willing to do so. Aumann and Serrano (2008) have recently proposed an index of riskiness that helps to make this intuition rigorous. We use their index to analyze the riskiness of corporate bonds and how this can change over time and across rating classes and how it compares to the riskiness of other financial instruments. We find statistically significant evidence that a number of financial and macroeconomic variables can predict time-variation in the riskiness of corporate bonds, including in ways one might not expect. For example, a higher yield-to-maturity lowers riskiness by reducing the frequency and the magnitude of negative holding-period returns.

Keywords: riskiness; corporate bonds; predictability (search for similar items in EconPapers)
JEL-codes: C46 G10 (search for similar items in EconPapers)
Date: 2009-10
New Economics Papers: this item is included in nep-fmk
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: The Riskiness of Corporate Bonds (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_730_09

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