TY - JOUR
T1 - Testing the credit-market-timing hypothesis using counterfactual issuing dates
AU - Frank, Murray Z.
AU - Nezafat, Mahdi
PY - 2019/10
Y1 - 2019/10
N2 - Do bond issuers successfully time the market? To answer this question, we compare market conditions on an issue day with conditions on days in a window around the issue day. We find that compared with windows of 21 days around issue days, bond issuers time the risk-free rate better than pure chance, with an average gain of 8 basis points; bond issuers also time the CDS spread better than pure chance, with an average gain of 12 basis points. Issuers who issue bonds more frequently do better than less frequent issuers do. Both risk-free rates and CDS spreads are lower on days when shelf-registered bonds are issued than they are on the days surrounding the issue days. Only CDS spreads are lower on days when privately placed bonds are issued.
AB - Do bond issuers successfully time the market? To answer this question, we compare market conditions on an issue day with conditions on days in a window around the issue day. We find that compared with windows of 21 days around issue days, bond issuers time the risk-free rate better than pure chance, with an average gain of 8 basis points; bond issuers also time the CDS spread better than pure chance, with an average gain of 12 basis points. Issuers who issue bonds more frequently do better than less frequent issuers do. Both risk-free rates and CDS spreads are lower on days when shelf-registered bonds are issued than they are on the days surrounding the issue days. Only CDS spreads are lower on days when privately placed bonds are issued.
KW - Behavioral finance
KW - Corporate bond market
KW - Credit market timing
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U2 - 10.1016/j.jcorpfin.2019.05.005
DO - 10.1016/j.jcorpfin.2019.05.005
M3 - Article
AN - SCOPUS:85065601177
SN - 0929-1199
VL - 58
SP - 187
EP - 207
JO - Journal of Corporate Finance
JF - Journal of Corporate Finance
ER -