How Integrated Are Corporate Bond and Stock Markets?

Mirela Sandulescu
Additional contact information
Mirela Sandulescu: University of Lugano; Swiss Finance Institute

No 20-09, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: In this paper, I study the degree of market integration between US corporate bonds and stocks of the corresponding issuing firms, accounting for their characteristics. I find that short-selling constraints are essential restrictions to optimal Sharpe ratio portfolios that yield admissible portfolio positions and implied pricing errors within quoted bid-ask spreads. My empirical evidence suggests that markets are more integrated for larger firms, with more liquid corporate bonds and stocks. Similarly, firms that are more leveraged, have a higher asset growth and profitability feature a greater extent of integration between their debt and equity securities.

Keywords: stochastic discount factor; corporate bonds; stocks; market integration; firm characteristics (search for similar items in EconPapers)
JEL-codes: G11 G12 G14 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2020-03
New Economics Papers: this item is included in nep-bec, nep-fmk, nep-ifn and nep-ore
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3528252 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp2009

Access Statistics for this paper

More papers in Swiss Finance Institute Research Paper Series from Swiss Finance Institute Contact information at EDIRC.
Bibliographic data for series maintained by Ridima Mittal ().