New methodology for event studies in Bonds

Bell, Peter N (2010): New methodology for event studies in Bonds.

Abstract

The new methodology to study the impact of corporate events on bonds is comprised of a sampling technique and regression model. The method is different from standard approaches, motivated by the belief that event impact should be reflected in levels of yield premium. The regression tests for a change in average bond price after an event, statistical inference is made by estimates of a dummy variable. A new sampling method is described to accommodate the irregular spacing of bond trades in time.

• Item Type: MPRA Paper
• Language: English
• Keywords: Event Study, Bonds, TRACE, ANOVA
• Subjects: G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency ; Event Studies ; Insider Trading; G - Financial Economics > G3 - Corporate Finance and Governance

References

Barber, B., and J. Lyon, 1997. Detecting long-run abnormal stock returns: The empirical power and specification of test statistics. Journal of Financial Economics 43, 341 - 372.

Bessembinder, H., Kahle, K., Maxwell, W., Xu, D., 2009. Measuring Abnormal Bond Performance. Review of Financial Studies 22, 4219 – 4258.

Crawley, M., 2005. Statistics An Introduction using R. John Wiley & Sons, West Sussex.

Epps, T. W., 1979. Comovements in Stock Prices in the Very Short Run. Journal of the American Statistical Association 74, 291-298 .

Fama, E., and K. French, 1993. Common Risk Factors in the Returns on Stocks and Bonds. Journal of Financial Economics 33:3–56.

Financial Industry Regulatory Authority (FINRA), 2008. User Guide Version 2.2: Trade and Reporting and Compliance Engine.

Heinkel , R., Krauss, A., 1988. Measuring Event Impacts in Thinly Traded Stocks. Journal of Financial and Quantitative Analysis 23, 71-88.

Little, R., Rubin, D., 1989. The Analysis of Social Science Data with Missing Values. Sociological Methods Research 18, 292-326.