RT Journal Article
SR Electronic
T1 Credit Spreads and Regime Shifts
JF The Journal of Fixed Income
FD Institutional Investor Journals
SP 58
OP 74
DO 10.3905/jfi.2015.25.1.058
VO 25
IS 1
A1 Ivelina Pavlova
A1 Ann Marie Hibbert
A1 Joel R. Barber
A1 Krishnan Dandapani
YR 2015
UL https://pm-research.com/content/25/1/58.abstract
AB The authors use data on a large sample of investment-grade and high-yield corporate bonds of non-financial firms to investigate the stability of the relationship between yield spreads and both Treasury term structure and market risk variables. The sample spans before, during, and after the recent financial crisis. Regression model estimates reveal a negative relationship between credit spread changes and changes in the term structure variables, as well as a significant effect of stock market conditions, bond volatility, and aggregate liquidity on spreads. Results from a Markov switching-regime model confirm the presence of two regimes and show different effects of certain spread determinants undereach regime.TOPICS: Fixed income and structured finance, quantitative methods