The systematic risk of corporate bonds: default risk, term risk, and index choice

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• 作者：Christian Klein (1)
  Christoph Stellner (1)
  
• 关键词：European corporate bond markets ; Market model ; Default risk ; Term risk ; Index choice ; G12 ; G15
• 刊名：Financial Markets and Portfolio Management
• 出版年：2014
• 出版时间：February 2014
• 年：2014
• 卷：28
• 期：1
• 页码：29-61
• 全文大小：478 KB
• 作者单位：Christian Klein (1)
  Christoph Stellner (1)
  
  1. University of Kassel, Kassel, Germany
  
• ISSN：1555-497X

文摘

In this paper, we empirically examine the systematic risk of corporate bonds in the Euro area. Based on a unique sample of 784 bonds from 1999 to 2010, we show that the systematic risk of constructed bond portfolios and individual bonds—measured against three different market indices—depends on credit quality, term risk, and index choice. A significant increase in systematic risk for lower-rated bonds is observed following the start of the financial crisis. In multi-factor models, bond portfolios load significantly on default and term risk, which are included as additional factors. Conducting Fama and MacBeth cross-sectional tests, we find that default and term risk are priced with economically relevant premiums that range from 0.35 to 0.62?% per month. Our results are robust to the inclusion of characteristics such as rating and time to maturity.