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Equity Volatility and Corporate Bond Yields
Author(s) -
Campbell John Y.,
Taksler Glen B.
Publication year - 2003
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1046/j.1540-6261.2003.00607.x
Subject(s) - volatility (finance) , corporate bond , bond , equity (law) , economics , financial economics , econometrics , monetary economics , business , finance , political science , law
This paper explores the effect of equity volatility on corporate bond yields. Panel data for the late 1990s show that idiosyncratic firm‐level volatility can explain as much cross‐sectional variation in yields as can credit ratings. This finding, together with the upward trend in idiosyncratic equity volatility documented by Campbell, Lettau, Malkiel, and Xu (2001), helps to explain recent increases in corporate bond yields.