TY - JOUR
T1 - The determinants of credit spread changes
AU - Collin-Dufresne, Pierre
AU - Goldstein, Robert S.
AU - Martin, J. Spencer
PY - 2001/12
Y1 - 2001/12
N2 - Using dealer's quotes and transactions prices on straight industrial bonds, we investigate the determinants of credit spread changes. Variables that should in theory determine credit spread changes have rather limited explanatory power. Further, the residuals from this regression are highly cross-correlated, and principal components analysis implies they are mostly driven by a single common factor. Although we consider several macroeconomic and financial variables as candidate proxies, we cannot explain this common systematic component. Our results suggest that monthly credit spread changes are principally driven by local supply/ demand shocks that are independent of both credit-risk factors and standard proxies for liquidity.
AB - Using dealer's quotes and transactions prices on straight industrial bonds, we investigate the determinants of credit spread changes. Variables that should in theory determine credit spread changes have rather limited explanatory power. Further, the residuals from this regression are highly cross-correlated, and principal components analysis implies they are mostly driven by a single common factor. Although we consider several macroeconomic and financial variables as candidate proxies, we cannot explain this common systematic component. Our results suggest that monthly credit spread changes are principally driven by local supply/ demand shocks that are independent of both credit-risk factors and standard proxies for liquidity.
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U2 - 10.1111/0022-1082.00402
DO - 10.1111/0022-1082.00402
M3 - Article
AN - SCOPUS:0040160904
SN - 0022-1082
VL - 56
SP - 2177
EP - 2207
JO - Journal of Finance
JF - Journal of Finance
IS - 6
ER -