Junk Bond Behavior with Daily Returns and Business Cycles
Using the Merrill-Lynch daily junk bond index, we reexamine and extend previous junk bond return results. We include (1) the effect of business cycles on junk and investment-grade bonds, (2) the sensitivity of junk bond returns to economic activity and/or interest rates, and (3) sample periods that allow us to investigate periods of reduced junk bond liquidity. Daily data confirm the same curious return behavior identified in studies using monthly returns. However, we reveal for the first time that junk bond returns track the movement of interest rates during economically good times but track stock returns during bad times.
Year of publication: |
1998
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Authors: | Patel, Jayen B ; Evans, Dorla A ; Burnett, John E |
Published in: |
Journal of Financial Research. - Southern Finance Association - SFA, ISSN 0270-2592. - Vol. 21.1998, 4, p. 407-18
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Publisher: |
Southern Finance Association - SFA Southwestern Finance Association - SWFA |
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