TY - JOUR
T1 - Understanding changes in corporate credit spreads
AU - Avramov, Doron
AU - Jostova, Gergana
AU - Philipov, Alexander
PY - 2007/3
Y1 - 2007/3
N2 - New evidence is reported on the empirical success of structural models in explaining changes in corporate credit risk. A parsimonious set of common factors and company-level fundamentals, inspired by structural models, was found to explain more than 54 percent (67 percent) of the variation in credit-spread changes for medium-grade (low-grade) bonds. No dominant latent factor was present in the unexplained variation. Although this set of factors had lower explanatory power among high-grade bonds, it did capture most of the systematic variation in credit-spread changes in that category. It also subsumed the explanatory power of the Fama and French factors among all grade classes.
AB - New evidence is reported on the empirical success of structural models in explaining changes in corporate credit risk. A parsimonious set of common factors and company-level fundamentals, inspired by structural models, was found to explain more than 54 percent (67 percent) of the variation in credit-spread changes for medium-grade (low-grade) bonds. No dominant latent factor was present in the unexplained variation. Although this set of factors had lower explanatory power among high-grade bonds, it did capture most of the systematic variation in credit-spread changes in that category. It also subsumed the explanatory power of the Fama and French factors among all grade classes.
UR - http://www.scopus.com/inward/record.url?scp=34247566562&partnerID=8YFLogxK
U2 - 10.2469/faj.v63.n2.4525
DO - 10.2469/faj.v63.n2.4525
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AN - SCOPUS:34247566562
SN - 0015-198X
VL - 63
SP - 90
EP - 105
JO - Financial Analysts Journal
JF - Financial Analysts Journal
IS - 2
ER -