The Determinants of Corporate Credit Spreads in Taiwan
Date Issued
2016
Date
2016
Author(s)
Lin, Tzu-Mu
Abstract
The structural models of corporate bonds have together established the theoretical basis on how interest rates and stock volatility can be used to explain the price of bonds. Many literatures that based on U.S. bond market have also found the strong connection between stock market and bond market returns. Some of the most commonly used indexes in stock market such as price-to-book ratio and the change of stock index can also help to predict the change of yield to maturity. We are trying to investigate the relationships between these variables and the yield spreads between corporate bonds and government bonds. Having taken the time series data from bond market in Taiwan, we found that there are cointegrations between yield spreads and those variables by using vector autoregression model and Johansen test. And except for stock index, these variables can be used to predict the yield spreads from different term-to-maturity.
Subjects
Credit Spread
Corporate Bonds
Vector Autoregression
Type
thesis