Journal of Financial Intermediation Vol. 19 No. 4 2010
Predicting credit spreads
Abstract
Predictions of firm-level credit spreads based on the current spot and forward credit spreads can be significantly improved upon by using the information contained in the shape of the credit-spread curve. However, the current credit-spread curve is not a sufficient statistic for predicting future out-of-sample credit spreads; predictions can be significantly improved upon by exploiting the information contained in the shape of the riskless yield curve. In the presence of credit-spread and riskless factors, other macroeconomic, marketwide, and firm-specific risk variables do not significantly improve predictions of credit spreads. These results have important implications for credit-spreads modeling as well as for better understanding corporate capital structure and risk management policies.
- DOI
- 10.1016/j.jfi.2009.02.004
- Volume
- 19
- Issue
- 4
- Pages
- 529-563
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref