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Forecasting sectorial profitability and credit spreads using bond yields

Dan Saar and Yossi Yagil

International Review of Economics & Finance, 2015, vol. 38, issue C, 29-43

Abstract: While previous research has focused mainly on government bonds as economic predictors we provide evidence that corporate bonds can act as predictors as well. By analyzing data from the financial and industrial sectors, which are the main pillars of the economy, we show that corporate bonds can predict changes in corporate profits and stock price behavior in the sector they are affiliated with. In addition, the examination of the relationship between sectorial credit spreads and various states of the economy shows that the financial sector is more sensitive to economic deterioration than the industrial sector.

Keywords: Sectorial forecasting; Credit spreads; Bond yields; Sectorial stock indices (search for similar items in EconPapers)
Date: 2015
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DOI: 10.1016/j.iref.2014.12.009

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