A Fast Literature Search Engine based on top-quality journals, by Dr. Mingze Gao.
- Topic classification is ongoing.
- Please kindly let me know [mingze.gao@mq.edu.au] in case of any errors.
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Results 7 resources
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This article combines the continuous arrival of information with the infrequency of trades and investigates the effects on asset price dynamics of positive- and negative-feedback trading. Specifically, the authors model an economy where stocks and bonds are traded by two types of agents: speculators who maximize expected utility and feedback traders who mechanically respond to price changes and infrequently submit market orders. They show that positive-feedback strategies increase the volatility of stock returns and the response of stock prices to dividend news. Conversely, the presence of negative-feedback traders makes stock returns less volatile and prices less responsive to dividends.
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To investigate the liquidity of large issues, this study tests for yield differences between corporate bonds and medium-term notes. In the sample, medium-term notes have an average issue size of 4 million, compared with 265 million for bonds. Among medium-term notes that have the same issuance date, the same maturity date, and the same corporate issuer, the authors find no relation between size and yields. Moreover, bonds and medium-term notes have statistically equivalent yields. Thus, rather than suggesting that large issues have greater liquidity, these findings indicate that large and small securities issued by the same borrower are close substitutes.
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Starting with Ingersoll (1977), the academic literature has repeatedly sought to explain why convertible bonds are called late. The findings here demonstrate there is no call delay to explain. This paper finds that most convertible bonds, given their call protection, are called as soon as possible. For those that are not, there are significant cash flow advantages to delaying. The median call delay for all convertible bonds is less than four months. If a safety premium is desired to assure the conversion value will exceed the call price at the end of call notice period, the median call period is less than a month.
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In this article, the authors develop relative pricing (APT) models that are successful in explaining expected returns in the bond market. They utilize indexes as well as unanticipated changes in economic variables as factors driving security returns. An innovation in this article is the measurement of the economic factors as changes in forecasts. The return indexes are the most important variables in explaining the time series of returns. However the addition of the economic variables leads to a large improvement in the explanation of the cross-section of expected returns. The authors utilize their relative pricing models to examine the performance of bond funds.
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We develop a simple approach to valuing risky corporate debt that incorporates both default and interest rate risk. We use this approach to derive simple closed-form valuation expressions for fixed and floating rate debt. The model provides a number of interesting new insights about pricing and hedging corporate debt securities. For example, we find that the correlation between default risk and the interest rate has a significant effect on the properties of the credit spread. Using Moody's corporate bond yield data, we find that credit spreads are negatively related to interest rates and that durations of risky bonds depend on the correlation with interest rates. This empirical evidence is consistent with the implications of the valuation model.
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This article examines the predictable variation in long-maturity government bond returns in six countries. A small set of global instruments can forecast 4 to 12 percent of monthly variation in excess bond returns. The predictable variation is statistically and economically significant. Moreover, expected excess bond returns are highly correlated across countries. A model with one global risk factor and constant conditional betas can explain international bond return predictability if the risk factor is proxied by the world excess bond return but not if it is proxied by the world excess stock return.