We study heterogeneity in the comovement of corporate bonds and equities, both at the bond level and at the firm level. Using an extended Merton model, we illustrate that corporate bonds that mature late relative to the rest of the bonds in its issuer's maturity structure should have stronger...

This paper examines the connection between the return volatilities of corporate bonds, equities, and Treasuries under the Merton model with stochastic interest rates. Constructing empirical volatilities using bond returns over daily, weekly, and monthly horizons, we find that empirical bond...

We document a significant investment bank fixed effect in the announcement returns of M&A deals. The interquartile range of bank fixed effects is 1.26%, compared with a full-sample average return of 0.72%. The results remain significant after controlling for the component of returns attributable...

We document a significant investment bank fixed effect in the announcement returns of an Mamp;A deal. The inter-quartile range of bank fixed effects is 1.26%, compared to a full-sample average return of 0.72%. The results remain significant after controlling for the component of returns...

We find that the empirical volatilities of corporate bond and CDS returns are higher than implied by equity return volatilities and the Merton model. This excess volatility may arise because structural models inadequately capture either fundamentals or illiquidity. Our evidence supports the...

This paper examines the liquidity of corporate bonds and its asset-pricing implications using a novel measure of illiquidity based on the magnitude of transitory price movements. Using transaction-level data for a broad cross-section of corporate bonds from 2003 through 2007, we find the...

We find that the empirical volatilities of corporate bond and CDS returns are higher than implied by equity return volatilities and the Merton model. This excess volatility may arise because structural models inadequately capture either fundamentals or illiquidity. Our evidence supports the...