Corporate bond prices and idiosyncratic risk: evidence from Australia

Fang, V. and Hung, C.-H. D. (2014) Corporate bond prices and idiosyncratic risk: evidence from Australia. Journal of International Financial Markets, Institutions and Money, 33, pp. 99-114. (doi:10.1016/j.intfin.2014.07.011)

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Abstract

In this paper we investigate the bond price effect upon the information arrival of firm-specific idiosyncratic risk. We consider idiosyncratic dispersion and idiosyncratic volatility that capture, respectively, the direction of information and the magnitude of idiosyncratic risk. We find that idiosyncratic volatility does not affect bond prices, while the direction of idiosyncratic risk which reflects the favorable or unfavorable information exhibits impacts on bond prices. Idiosyncratic dispersion in the stock return of a firm in the preceding week, in general, is positively associated with bond price changes in the current week. This effect is most pronounced for firms exhibiting characteristics associated with lower default risk.

Item Type:Articles
Status:Published
Refereed:Yes
Glasgow Author(s) Enlighten ID:Hung, Dr Daniel
Authors: Fang, V., and Hung, C.-H. D.
College/School:College of Social Sciences > Adam Smith Business School > Accounting and Finance
Journal Name:Journal of International Financial Markets, Institutions and Money
Publisher:Elsevier
ISSN:1042-4431
ISSN (Online):1873-0612|
Copyright Holders:Copyright © 2014 Elsevier
First Published:First published in Journal of International Financial Markets, Institutions and Money 33:99-114
Publisher Policy:Reproduced in accordance with the copyright policy of the publisher.

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