Mirela Sandulescu (University of Lugano)
13 January 2020 @ 12:00 - 13:15
“How Integrated Are Corporate Bond and Stock Markets?”
Abstract: In this paper, I study the degree of market integration between US corporate bonds and stocks of the corresponding issuing firms, accounting for their characteristics. I find that short-selling constraints are essential restrictions to optimal Sharpe ratio portfolios that yield admissible portfolio positions and implied pricing errors within quoted bid-ask spreads. My empirical evidence suggests that larger firms, with more liquid corporate bonds and stocks, appear to be more integrated. Similarly, firms that are more leveraged, have a higher asset growth and profitability feature a greater extent of integration between their debt and equity securities.