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Testing the credit-market-timing hypothesis using counterfactual issuing dates

Murray Z. Frank and Mahdi Nezafat

Journal of Corporate Finance, 2019, vol. 58, issue C, 187-207

Abstract: Do bond issuers successfully time the market? To answer this question, we compare market conditions on an issue day with conditions on days in a window around the issue day. We find that compared with windows of 21 days around issue days, bond issuers time the risk-free rate better than pure chance, with an average gain of 8 basis points; bond issuers also time the CDS spread better than pure chance, with an average gain of 12 basis points. Issuers who issue bonds more frequently do better than less frequent issuers do. Both risk-free rates and CDS spreads are lower on days when shelf-registered bonds are issued than they are on the days surrounding the issue days. Only CDS spreads are lower on days when privately placed bonds are issued.

Keywords: Credit market timing; Behavioral finance; Corporate bond market (search for similar items in EconPapers)
JEL-codes: G10 G14 G17 G40 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:58:y:2019:i:c:p:187-207

DOI: 10.1016/j.jcorpfin.2019.05.005

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