I decompose the variation of credit spreads for corporate bonds into changing expected returns and changing expectation of credit losses. Using a log-linearized pricing identity and a vector autoregression applied to micro-level data from 1973 to 2011, I find that expected returns contribute to...

In the past 20 years, measures of economic uncertainty have been developed that are purely market price based; structural model based, using data on real fundamentals and asset prices; text based; or survey based. We compare the performance of these uncertainty measures in forecasting three real...