Equity Momentum in European Credits

Posted: 22 Aug 2019 Last revised: 29 May 2020

See all articles by Hendrik Kaufmann

Hendrik Kaufmann

Deka Investment GmbH

Philip Messow

Robeco Asset Management

Date Written: August 19, 2019

Abstract

We investigate the phenomenon that past winners in the stock market are potential future winners in the European bond market. By using a data-set of EUR denominated bonds for the IG and HY market since 2000, we show that the stock market leads the bond market as well as rating changes. Firms with positive (negative) equity momentum have an improving (deteriorating) rating in the future. This leads to the conclusion that an underreaction of the bond market to the firm specific information about changing default risk is a likely source of the spillover effect.

Keywords: corporate bond, spillover, momentum, equity momentum

JEL Classification: G11, G12, G14

Suggested Citation

Kaufmann, Hendrik and Messow, Philip, Equity Momentum in European Credits (August 19, 2019). Available at SSRN: https://ssrn.com/abstract=3436776 or http://dx.doi.org/10.2139/ssrn.3436776

Hendrik Kaufmann (Contact Author)

Deka Investment GmbH ( email )

Mainzer Landstraße 16
Frankfurt, DE 60325
Germany

HOME PAGE: http://www.deka.de

Philip Messow

Robeco Asset Management ( email )

Rotterdam, 3011 AG
Netherlands

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