Equity Volatility and Corporate Bond Yields
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- 7 November 2003
- journal article
- research article
- Published by Wiley in The Journal of Finance
- Vol. 58 (6) , 2321-2350
- https://doi.org/10.1046/j.1540-6261.2003.00607.x
Abstract
This paper explores the effect of equity volatility on corporate bond yields. Panel data for the late 1990s show that idiosyncratic firm‐level volatility can explain as much cross‐sectional variation in yields as can credit ratings. This finding, together with the upward trend in idiosyncratic equity volatility documented by Campbell, Lettau, Malkiel, and Xu (2001), helps to explain recent increases in corporate bond yields.Keywords
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