Year: 2020
Type: report
Abstract: Methodological insights generating comprehensive transaction-based bond datasets reveal that corporate bonds' book-to-market ratios predict returns from prices transacted days after signal observation.Senior bonds (even investment-grade) with the 20% highest ratios outperform the 20% lowest by 3%-4%annually after non-parametrically controlling for numerous liquidity, default, microstructure, and priced-risk attributes: yield-to-maturity, structural model equity hedges, bid-ask-spread, duration/maturity, credit spread/rating, past returns, coupon, size, age, and industry.Spreads for all-bond samples are larger.An efficient bond market would not exhibit the observed decay in the ratio's predictive efficacy with implementation delays, smaller yield-tomaturity spreads, or similar-sized spreads across differing liquidity/de-fault bond-types.
DOI: 10.3386/w27655
Authors: Söhnke Bartram, Mark Grinblatt, Yoshio Nozawa
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W3048020165