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Title: The lead-lag relation between the stock and the bond markets
Authors: Tolikas, K
Keywords: Informational efficiency;Corporate bonds;Lead-lag relation
Issue Date: 2017
Citation: The European Journal of Finance
Abstract: I examine the relative informational efficiency of bonds and the underlying stocks through the lead-lag relation between their daily returns. I find that stock returns lead the returns of high yield bonds but not those of investment grade bonds, which indicates that the stock market is relatively more informational efficient than the bond market. The findings imply trading opportunities for the bonds that are highly sensitive to the release of new information. I also find that stocks detect impending defaults earlier than bonds, which implies that bond holders may have enough time to protect their capital.
ISSN: 1351-847X
Appears in Collections:Dept of Economics and Finance Research Papers

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