Interest rates, stock returns and credit spreads: Evidence from German Eurobonds

Wagner, N; Hogan, W; Batten, J

Interest rates, stock returns and credit spreads: Evidence from German Eurobonds

Wagner, N Hogan, W Batten, J

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Publication Type:: Journal Article
Citation:: Economic Notes, 2005, 34 (1), pp. 35 - 50
Issue Date:: 2005-02-01

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Field	Value	Language
dc.contributor.author	Wagner, N	en_US
dc.contributor.author	Hogan, W	en_US
dc.contributor.author	Batten, J	en_US
dc.date.issued	2005-02-01	en_US
dc.identifier.citation	Economic Notes, 2005, 34 (1), pp. 35 - 50	en_US
dc.identifier.issn	0391-5026	en_US
dc.identifier.uri	http://hdl.handle.net/10453/5126
dc.description.abstract	We investigate daily variations in credit spreads on investment-grade Deutschemark-denominated Eurobonds during the challenging 1994-1998 period. Empirical results, from a Longstaff and Schwartz (1995) two-factor regression, extended for correlated spread changes and heteroskedasticity, indicate strong persistence in spread changes. Consistent with theory and previous findings, changes in spreads are significantly negatively related to the term-structure level while, contrary to theory, the proxy for asset value does not yield a significant negative contribution. We even find a significant positive relation for Eurobonds with long maturity. Tentative interpretations are portfoliorebalancing activities or differing risk factor sensitivities on short- vs. long-maturity bonds. © Banca Monte dei Paschi di Siena SPA, 2005.	en_US
dc.relation.ispartof	Economic Notes	en_US
dc.relation.isbasedon	10.1111/j.0391-5026.2005.00143.x	en_US
dc.subject.classification	Finance	en_US
dc.title	Interest rates, stock returns and credit spreads: Evidence from German Eurobonds	en_US
dc.type	Journal Article
utslib.citation.volume	1	en_US
utslib.citation.volume	34	en_US
utslib.for	140210 International Economics and International Finance	en_US
utslib.for	14 Economics	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
utslib.copyright.status	closed_access
pubs.issue	1	en_US
pubs.publication-status	Published	en_US
pubs.volume	34	en_US

Abstract:

We investigate daily variations in credit spreads on investment-grade Deutschemark-denominated Eurobonds during the challenging 1994-1998 period. Empirical results, from a Longstaff and Schwartz (1995) two-factor regression, extended for correlated spread changes and heteroskedasticity, indicate strong persistence in spread changes. Consistent with theory and previous findings, changes in spreads are significantly negatively related to the term-structure level while, contrary to theory, the proxy for asset value does not yield a significant negative contribution. We even find a significant positive relation for Eurobonds with long maturity. Tentative interpretations are portfoliorebalancing activities or differing risk factor sensitivities on short- vs. long-maturity bonds. © Banca Monte dei Paschi di Siena SPA, 2005.

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http://hdl.handle.net/10453/5126