The Index Effect in the Corporate Bond Market

Journal of Fixed Income Pub Date : 2020-01-04 DOI:10.2139/ssrn.3462393

Friedrich-Carl Franz

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Abstract

The author finds large and statistically significant abnormal returns of USD-denominated corporate bonds, which were up- or downgraded in the Bloomberg Barclays Investment Grade and High Yield Index from 2012 to 2018. Downgrades face a strong negative preannouncement drift with a subsequent reversal. For upgrades, the drift is smaller in magnitude and the reversal nonexistent. In contrast to the preannouncement drift, the reversal seems to be related to price pressure, which is caused by index-linked trading. This hypothesis is supported by an analysis of actual exchange-traded fund trading behavior with respect to credit rating changes. TOPICS: Fixed income and structured finance, exchange-traded funds and applications Key Findings • There are large and statistically significant abnormal returns of USD-denominated corporate bonds, which were up- or downgraded in the Bloomberg Barclays Investment Grade and High Yield Index from 2012 to 2018. • Downgrades face a strong negative preannouncement drift with a subsequent reversal. For upgrades, the drift is smaller in magnitude and the reversal nonexistent. • In contrast to the preannouncement drift, the reversal seems to be related to price pressure, which is caused by index-linked trading. This hypothesis is supported by an analysis of actual ETF trading behavior with respect to credit rating changes.

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公司债券市场中的指数效应

作者发现，2012年至2018年，以美元计价的公司债券在彭博巴克莱投资等级和高收益率指数中出现了大幅且具有统计意义的异常回报。降级面临着强烈的负面预告漂移和随后的反转。对于升级，漂移幅度较小，并且不存在反转。与预先宣布的漂移相反，反转似乎与价格压力有关，价格压力是由指数挂钩交易引起的。这一假设得到了对实际交易所交易基金交易行为与信用评级变化的分析的支持。主题：固定收益和结构化金融、交易所交易基金和应用关键发现•美元计价的公司债券存在大量且具有统计意义的异常回报，从2012年到2018年，这些债券在彭博巴克莱投资等级和高收益指数中被上调或下调。•降级面临着强烈的负面预告漂移和随后的反转。对于升级，漂移幅度较小，并且不存在反转。•与预先宣布的漂移相反，反转似乎与价格压力有关，价格压力是由指数挂钩交易引起的。这一假设得到了关于信用评级变化的实际ETF交易行为分析的支持。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

Journal of Fixed Income Economics, Econometrics and Finance-Economics and Econometrics

CiteScore

1.10

自引率

0.00%

发文量

期刊介绍： The Journal of Fixed Income (JFI) provides sophisticated analytical research and case studies on bond instruments of all types – investment grade, high-yield, municipals, ABSs and MBSs, and structured products like CDOs and credit derivatives. Industry experts offer detailed models and analysis on fixed income structuring, performance tracking, and risk management. JFI keeps you on the front line of fixed income practices by: •Staying current on the cutting edge of fixed income markets •Managing your bond portfolios more efficiently •Evaluating interest rate strategies and manage interest rate risk •Gaining insights into the risk profile of structured products.