Anomalies and market (dis)integration

Jaewon Choi, Yongjun Kim

Research output: Contribution to journalArticle

4 Citations (Scopus)

Abstract

If equity and corporate bond markets are integrated, risk premia in one market should appear in the other, and their magnitudes should be consistent with each other. We use this powerful insight to test market integration. Some variables (e.g., profitability and net issuance) fail to explain bond returns, and for others (e.g., investment and momentum) bond return premia are too large compared with their loadings, or hedge ratios, on equity returns of the same firms. The risk premia of standard factors tend to differ between the two markets. Market integration weakens when noisy investor demand and short-sale impediments are stronger.

Original languageEnglish
Pages (from-to)16-34
Number of pages19
JournalJournal of Monetary Economics
Volume100
DOIs
Publication statusPublished - 2018 Dec

Fingerprint

Market integration
Anomaly
Risk premia
Bond returns
Corporate bonds
Profitability
Hedge ratio
Integrated
Short sales
Equity
Momentum
Investors
Bond market
Return on equity
Impediments
Factors

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

Cite this

Choi, Jaewon ; Kim, Yongjun. / Anomalies and market (dis)integration. In: Journal of Monetary Economics. 2018 ; Vol. 100. pp. 16-34.
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Anomalies and market (dis)integration. / Choi, Jaewon; Kim, Yongjun.

In: Journal of Monetary Economics, Vol. 100, 12.2018, p. 16-34.

Research output: Contribution to journalArticle

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