Equity Volatility and Corporate Bond Yields

John Y. Campbell () and Glen B. Taksler

No 8961, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper explores the effect of equity volatility on corporate bond yields. Panel data for the late 1990's show that idiosyncratic firm-level volatility can explain as much cross-sectional variation in yields as can credit ratings. This finding, together with the upward trend in idiosyncratic equity volatility documented by Campbell, Lettau, Malkiel, and Xu (2001), helps to explain recent increases in corporate bond yields.

JEL-codes: G12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fin and nep-fmk
Date: 2002-05
Note: AP
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