On the determinants of expected corporate bond returns in Tunisia

Yacine Hammami () and Maha Bahri

Research in International Business and Finance, 2016, vol. 38, issue C, 224-235

Abstract: In this paper, we document that ratings in the Tunisian bond market are the most important determinant of expected corporate bond returns. When we account for this characteristic, we find that systematic risks do not explain the cross-section of expected bond returns. These findings are obtained for a wide range of systematic factors, so the omitted variables problem cannot justify the failure of asset pricing models to explain expected corporate bond returns in Tunisia. Mispricing due to pessimistic investors or their inability to hold diversifiable bond portfolios are likely to explain why characteristics fare better than betas in explaining bond returns in Tunisia.

Keywords: Bond pricing; Ratings; Default risk; Liquidity risk; Political risk; Emerging markets (search for similar items in EconPapers)
JEL-codes: G12 G21 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:38:y:2016:i:c:p:224-235

DOI: 10.1016/j.ribaf.2016.04.015

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