Seminar (Dept. of Finance)

Title: Can Asymmetric Information in Corporate Bonds Predict Equity Market Return？

Speaker: Peixuan Yuan, Assistant Professor, School of Finance, Renmin University of China, China

Time: 10:00-11:30, Nov 3, 2023(Friday)

Venue: Room 1008, Mingde Business Building

Language: English/Chinese

ABSTRACT:

We document that the cross-sectional mean and skewness of bond returns positively and significantly predict future stock market returns both in- and out-of-sample. The predictability emerges from informed bond trading and gradual diffusion of information. The predictive power of the cross-sectional skewness is stronger, uncorrelated with other well-known equity premium predictors, and partially driven by information asymmetry in bond trading which conveys a common perspective about future stock market status. Particularly, both bond moments contain information about future aggregate firm fundamentals and real economic activity. Moreover, the lead-lag effect is more pronounced when the lack of integration between the two markets is more severe. Finally, the predictive power extends to various size- and value-sorted stock portfolios and industries.

SHORT BIOGRAPHY:

Peixuan Yuan is an assistant professor of finance at at the School of Finance, Renmin University of China. He obtained his Ph.D.in Finance from Rutgers University. His research interests lie in empirical asset pricing, derivatives pricing, machine learning and big data. His work has been published in Management Science and other leading journals.