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Daily returns of the European corporate bond market are predicted using a penalized Lasso regression or Random forests. Predictions are utilized in investment strategies that allocate resources into risky position: interest-rate hedged corporate bonds or unhedged corporate bonds and risk-free position proxied by the Euro-Bobl futures that track the German government bonds. The strategies are more profitable with a lower risk than their passive alternatives, which only invest in corporate bonds (hedged or unhedged), but the daily rebalancing can be costly. Therefore, we examine the break-even transaction costs and suggest two approaches to lower the overall costs. Overall, even with costs, active strategies based on prediction can achieve higher returns with a lower risk. [ABSTRACT FROM AUTHOR]

This study addresses interest rate sensitivity of emerging market corporate debt. Previous research suggests that interest rate sensitivity of corporate bonds depends on residual maturity of issues, creditworthiness of issuers, embedded options and other idiosyncratic factors. However, the dependence of interest rate sensitivity on phases of the business cycle has not received an appropriate academic attention. This paper provides empirical evidence and theoretical interpretation of a dichotomy of interest rate sensitivity across the phases of the cycle, and sheds light on how credit spreads respond to interest rates. The historical span of the research covers the period of 2004–2016. The findings imply that hedging interest rate risk ought to be a dynamic process and take into consideration where the economy is positioned in the current business cycle. This research provides important insights on the nature of interest rate sensitivity, capable of enhancing financial stability and improving efficiency of financial system. [ABSTRACT FROM AUTHOR]

This paper selects weekly transaction data from the Shenzhen Exchange and Shanghai Exchange for 2012 to 2018 to investigate factors including corporate size, the ration of book-to-market, default risk, term and credit rating that influence the corporate bond spread. It can be concluded that small firms prefer to issue high yield spread bonds while large firms issue bonds with low yield spreads. High (low) book-to-market firms issue high (low) yield spread bonds. The most important factors influencing corporate bond spread yield are default risk, terms, and credit ratings. We suggest that China Securities Regulatory Commission should encourage small firms to issue corporate bonds and there should be more kinds of credit ratings bonds in China bond market. [ABSTRACT FROM AUTHOR]

This paper investigates the impact of multidimension liquidity, credit risk, and the interaction between liquidity and credit risk on corporate bond spreads based on a large transaction data set from July, 2006 to June, 2016, including the monthly data of 3716 bonds in China. Our main findings reveal that liquidity premiums are the main parts of corporate bond spreads. The interaction between liquidity and credit risk plays a significant role in determining corporate bond spreads. In addition, the differences between the interbank market and the exchange market have a significant impact on corporate bond spreads in normal period, and the interaction between liquidity and credit risk has an enhanced impact on corporate bond spreads during financial crisis. We also find that the interaction between liquidity and credit risk will increase with the increase of liquidity risk and credit risk and it is a time-varying dynamic process. [ABSTRACT FROM AUTHOR]

The role of green financing in propelling corporate green transformation and sustainable growth has attracted a lot of interest. Regarding their function in promoting corporate green transformation, green bonds—a crucial part of green finance—pose an important research question. This study, targeting Chinese A-share listed corporates, employing double machine learning models, aims to delve into the impact and mechanisms of green bond issuance on corporate green transformation. The findings indicate that issuing green bonds significantly drives corporate green transformation, especially in state-owned, smaller-scale, and non-manufacturing firms, where the impact is more evident. Further analysis discloses that green bond issuance primarily facilitates corporate green transformation through its functions in green investment and financing, green regulatory compliance, and green governance. This study serves as a theoretical reference, guiding businesses in seizing emerging opportunities in the green bond market and actively undertaking green transformation projects, thereby catalyzing a comprehensive economic transition. [ABSTRACT FROM AUTHOR]

This paper explores the pricing implications of green bonds in the Chinese corporate bond market. We document a large greenium in the Chinese green bond market, whereby green bonds are issued at lower offering yield spreads in the primary market and traded at lower yields in the secondary market. The magnitude of the Chinese greenium is substantially greater than other international green bond markets. Exploring the underlying mechanisms, we document convincing evidence that mitigation of information asymmetry and exposure to salient environmental stimuli such as air pollution are plausible explanations of the greenium. • Green certification has pricing implications in the Chinese corporate bond market. • This study documents a greenium in the Chinese bond market. • Green bonds are issued at lower offering yield spreads in the primary market. • Green bonds are traded at lower yields in the secondary market. • The Chinese greenium is greater than other international green bond markets. [ABSTRACT FROM AUTHOR]