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Macroeconomic and Financial Determinants of the Volatility of Corporate Bond Returns

Belén Nieto (), Alfonso Novales and Gonzalo Rubio ()
Additional contact information
Belén Nieto: Departamento de Economía Financiera y Contabilizad, University of Alicante, San Vicente del Raspeig, 03690 Alicante, Spain., https://web.ua.es/es/researchgroupmffe/investigadores/nietodomenech.html
Gonzalo Rubio: University CEU Cardenal Herrera, Elche, 03204 Alicante, Spain., https://www.ucm.es/icae

No 2014-25, Documentos de Trabajo del ICAE from Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico

Abstract: This paper analyzes the relationship between the volatility of corporate bond returns and standard financial and macroeconomic indicators reflecting the state of the economy. We employ the GARCHMIDAS multiplicative two-component model of volatility that distinguishes the short-term dynamics from the long-run component of volatility. Both the in-sample and out-of-sample analysis show that recognizing the existence of a stochastic low-frequency component captured by macroeconomic and financial indicators may improve the fit of the model to actual bond return data, relative to the constant long-run component embedded in a typical GARCH model.

Keywords: Corporate bonds; Volatility; Low-frequency component; High-frequency component; Macroeconomic indicators; Financial indicators. (search for similar items in EconPapers)
JEL-codes: C22 E44 G12 (search for similar items in EconPapers)
Pages: 54 pages
Date: 2014
New Economics Papers: this item is included in nep-mac and nep-mst
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Journal Article: Macroeconomic and Financial Determinants of the Volatility of Corporate Bond Returns (2015) Downloads
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