Comoment risk in corporate bond yields and returns

François, Pascal; Heck, Stéphanie; Hübner, Georges; Lejeune, Thomas

doi:10.1111/jfir.12281

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Article (Scientific journals)

Comoment risk in corporate bond yields and returns

François, Pascal; Heck, Stéphanie; Hübner, Georges et al.

2022 • In Journal of Financial Research, 45 (3), p. 471-512

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https://hdl.handle.net/2268/290057

DOI
10.1111/jfir.12281

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Keywords :

Finance

Abstract :

[en] In this article, we provide a comoment factor analysis of corporate bond returns using sector indices. We split returns into systematic default risk premiums rewarding for default risk exposure, and net excess returns adjusting for market conditions. Higher comoments contribute positively to systematic default risk premiums, whereas covariance and cokurtosis lower net excess returns as they trigger value losses. The positive coskewness effect, more pronounced during low yields, corroborates the “reach-for-yield” phenomenon. The gradual substitution between covariation and tail risk contributions to the systematic default risk premium for higher maturities suggests a shift from the pricing of downgrading to outright default risk.

Disciplines :

Finance

Author, co-author :

François, Pascal; HEC Montreal Montreal, Quebec Canada

Heck, Stéphanie ; Université de Liège - ULiège > HEC Liège : UER > UER Finance et Droit ; Commission de Surveillance du Secteur Financier Luxembourg

Hübner, Georges ; Université de Liège - ULiège > HEC Recherche > HEC Recherche: Financial Management for the Future

Lejeune, Thomas ; Université de Liège - ULiège > HEC Liège : UER > UER Economie ; National Bank of Belgium Economics and Research Department Bruxelles Belgium

Language :

English

Title :

Comoment risk in corporate bond yields and returns

Publication date :

27 April 2022

Journal title :

Journal of Financial Research

ISSN :

0270-2592

eISSN :

1475-6803

Publisher :

Wiley

Volume :

Issue :

Pages :

471-512

Peer reviewed :

Peer Reviewed verified by ORBi

Additional URL :

https://onlinelibrary.wiley.com/doi/pdf/10.1111/jfir.12281

Funders :

SSHRC - Social Sciences and Humanities Research Council
Deloitte Belgium
F.R.S.-FNRS - Fonds de la Recherche Scientifique

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