IFin Seminar, Yoshio Nozawa, HKUST - Hong Kong University of Science and Technology - "The Global Credit Spread Puzzle"

Istituto di finanza

Data: 12 Febbraio 2019 / 12:25 - 13:40

Relatore: Yoshio Nozawa, HKUST - Hong Kong University of Science and Technolog

Tema:     "The Global Credit Spread Puzzle"

Data:      12 febbraio 2019

Ore:        12:25 - 13:40

Aula:       Blue Room (Executive Center)

Campus di Lugano



Using security-level credit spread data in Japan, the UK, Germany, France, Italy and Canada, we find robust evidence that structural models of risky debt underpredict bond yield spreads and single-name credit default swap spreads, in particular for investment-grade names. The country-level pricing errors are large, comove with the errors in the US, have a strong factor structure, and are associated with liquidity proxies and option-based uncertainty measures. The first principal component of the pricing errors negatively predicts economic growth in these six countries, underscoring the economic significance of the information missed by the model.