The Global Cross-Section of Corporate Bonds: Market, Maturity and Liquidity

Geert Bekaert, Roberto De Santis and Tomas Mondino

No 19506, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We investigate a large set of pricing factors for corporate bonds in the 6 largest international markets. Econometrically, we show that pricing tests of cross-sections of bond portfolios are severely compromised in small samples. Employing Barillas and Shanken (2017) tests and global portfolios, standard corporate bond factor models are rejected in favor of a model featuring the global corporate bond market, a global maturity spread factor and a global liquidity spread factor. This model also prices a wide set of cross sections, including momentum, value, idiosyncratic risk, downside risk and ratings portfolios. The model also fits currency-specific cross-sections well, except for Japanese Yen bonds. Including a local market factor improves the fit substantially for Japanese Yen bonds. All returns are hedged in US dollars as hedged corporate bond portfolios strongly outperform unhedged portfolios.

Keywords: Asset pricing; Corporate bonds; Factors; Financial integration; Currency hedging (search for similar items in EconPapers)
JEL-codes: G12 G15 (search for similar items in EconPapers)
Date: 2024-09
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP19506 (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:cpr:ceprdp:19506

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP19506

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().