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UID:e5af16302c657f4a89297eac498ad51f
DTSTAMP:20240503T162459Z
SUMMARY:"Comovement of Corporate Bonds and Equities" Authors: Jack Bao (Fed
 eral Reserve Board of Governors) and Kewei Hou (Ohio State Univ.)
DESCRIPTION: \n\nAbstract We study heterogeneity in the comovement of corpo
 rate bonds\nand equities\, both at the bond level and at the rm level. To\
 nformalize empirical predictions\, we use an extended Merton model to\nill
 ustrate that\, holding the actual maturity constant\, corporate bonds\ntha
 t are due late relative to the rest of the bonds in their\nissuers’ matu
 rity structure should have stronger comovement with\nequities. In contrast
 \, an endogenous default model with equity pay-in\nsuggests that a bond’
 s position in its issuer’s maturity structure\nhas little relation with 
 the strength of the comovement. In the data\,\nwe nd that bonds that are l
 ater in their issuers’ maturity\nstructure comove more strongly with equ
 ities\, consistent with the\nprediction of the extended Merton model. In a
 ddition\, we nd that the\ncomovement between bonds and equities is stronge
 r for rms with higher\ncredit risk as proxied by higher book-to-market rat
 ios and lower\ndistance-to-default even after controlling for ratings. Our
  results\nhighlight the important eects of bond and rm level characteristi
 cs\non the relative returns of corporate bonds and equities.\n 
DTSTART:20141003T143000Z
DTEND:20141003T155000Z
LOCATION:Gerri C. LeBow Hall\, 3220 Market Street\, 208\, Philadelphia\, PA
  19104
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