Risk and return in international corporate bond markets

Geert Bekaert and Roberto A. De Santis

Journal of International Financial Markets, Institutions and Money, 2021, vol. 72, issue C

Abstract: Corporate bond returns in major developed economies increase with lower ratings and higher residual maturity. The performance of various factor models featuring corporate, sovereign and equity markets as factors suggests that the corporate bond factor plays a dominant role in explaining the variation of corporate bond returns. From a factor model perspective, local factors contribute substantially more than global factors. The factor exposures show intuitive patterns: as ratings worsen, corporate bond β’s increase steeply, sovereign β’s decline monotonically and equity β’s show a hockey stick pattern. However, from a pricing perspective, we find little evidence against the global CAPM model.

Keywords: Corporate bond markets; CAPM; International market integration; Asset class integration; Bond ratings; Risk; Return; Market efficiency tests; Comovement (search for similar items in EconPapers)
JEL-codes: G10 G11 G15 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Working Paper: Risk and return in international corporate bond markets (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:72:y:2021:i:c:s1042443121000573

DOI: 10.1016/j.intfin.2021.101338

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