Are Capital Market Anomalies Common to Equity and Corporate Bond Markets? An Empirical Investigation

Details

Serval ID
serval:BIB_B1A2448B5111
Type
Article: article from journal or magazin.
Collection
Publications
Title
Are Capital Market Anomalies Common to Equity and Corporate Bond Markets? An Empirical Investigation
Journal
Journal of Financial and Quantitative Analysis
Author(s)
Chordia T., Goyal A., Nozawa Y., Subrahmanyam A., Tong Q.
ISSN
0022-1090
1756-6916
Publication state
Published
Issued date
08/2017
Peer-reviewed
Oui
Volume
52
Number
04
Pages
1301-1342
Language
english
Abstract
A significant fraction of firms' financing occurs via public debt markets. Accordingly, we investigate whether financial statement characteristics and other variables that predict equity returns also predict corporate bond returns. Profitability, asset growth, and equity market capitalization negatively predict corporate bond returns, but other predictors, like accruals and earnings surprises, do not. Since smaller, unprofitable firms should be more risky, and firms with high asset growth (or high real investment) should have lower required returns, the evidence indicates that corporate bond returns accord with the risk-reward paradigm. Stock markets lead bond markets, consistent with equities aggregating diverse information and transmitting it to bonds. Overall, we find that accounting for transaction costs, bonds are efficiently priced.
Keywords
Economics and Econometrics, Accounting, Finance
Web of science
Create date
19/09/2017 10:57
Last modification date
20/08/2019 16:20
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