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Firm-specific stock and bond predictability: New evidence from Canada
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Firm-specific stock and bond predictability: New evidence from Canada

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  • Cao, N.
  • Galvani, V.
  • Gubellini, S.

Abstract

Asynchronous and contemporaneous links between the values of individual stocks and bonds issued by the same firm offer indications on how firm-specific information streams between the stock and bond markets. We examine these links using a novel database including bonds issued by Canadian firms over three decades. The overall results provide strong evidence of information flows streaming from the stock to the bond market, and suggest that significant bidirectional information flows were triggered by the 2007 financial crisis. Further, information regarding the mean of the firm's value, rather than its volatility, prevails in driving contemporaneous variations in stocks and bonds.

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  • Cao, N. & Galvani, V. & Gubellini, S., 2017. "Firm-specific stock and bond predictability: New evidence from Canada," International Review of Economics & Finance, Elsevier, vol. 51(C), pages 174-192.
    • Handle: RePEc:eee:reveco:v:51:y:2017:i:c:p:174-192
    DOI: 10.1016/j.iref.2017.05.007
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    More about this item

    Keywords

    Bond yields; Stock returns; Bond-stock correlations; Market efficiency;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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