Prof. Dirk Hackbarth from Washington University in St. Louis is giving a
VGSF research seminar on "Corporate Bond Credit Spreads and Forecast
Dispersion" on FRIDAY, Nov. 3rd, from 15:30 to 17:00 at the WU Wien
(Seminarraum D204, UZA 4, Nordbergstrasse 15, 1090 Wien, see
http://www.wu-wien.ac.at/portal/ueber_wu/standorte/lageplan4 for a detailed
plan). Please find the paper's abstract below.
Dirk asked me NOT to put his paper onto our webpage. If you want to get the
paper, please contact me via email and I send it to you.
Dirk is going to be available for meetings on Friday. If you are interested,
please contact Michael Halling (michael.halling(a)univie.ac.at).
Best,
Michael Halling
Abstract
Recent research establishes a negative relation between stock returns and
dispersion of analysts' earnings forecasts, arguing that, due to short-sale
constraints in equity markets, asset prices more reflect the views of
optimistic investors. In this article, we examine whether a similar effect
prevails in corporate bond markets. After controlling for common bond-level,
firm-level, and macroeconomic variables, we find evidence that bonds of
firms with higher dispersion demand significantly higher credit spreads than
otherwise similar bonds and that changes in dispersion reliably predict
changes in credit spreads. We argue the dominating effect of dispersion is
to proxy for future cash flow uncertainty due to the limited role of
short-sale constraints in corporate bond markets.