Does the credit risk premium lead the stock market?
Author:
Gabe de Bondt
DOI:
10.1080/17446540500219820
Publication Frequency:
6 issues per year
Published in:
Applied Financial Economics Letters,
Volume
1,
Issue
5
September
2005
, pages 263
- 268
Subjects:
Economics;
Macroeconomics;
Number of References: 7
Formats available:
HTML
(English)
:
PDF
(English)
Now published as: Applied Economics Letters
The circumstances under which this title is published have changed:
Reason for change: Merged
Date of change: 2009
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Abstract
Empirical results for the United States show that the credit risk premium leads the stock market by up to four weeks. They are robust across different stock market measures, empirical methods and sample periods. The finding of a flight to quality that first occurs in the corporate bond and subsequently in the stock market suggests a pecking order in risk premia. It implies that stock market investors may benefit from closely monitoring the corporate bond market.
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