This paper constructs an investor sentiment measure at both individual bond and aggregate levels, uncovering the first evidence that investor sentiment has strong cross- sectional predictive power for corporate bond returns. High bond investor sentiment leads to low future returns. A portfolio...

We examine the extent to which institutional investors herd in the U.S. corporate bond market and the price impact of their herding behavior. We find that the level of institutional herding in corporate bonds is substantially higher than what is documented for equities, and that sell herding is...

We examine the pricing implications of reaching for yield, which we define as a preference for bonds with higher yields at a given rating or for bonds with higher ratings at given yields. Reaching for yield is associated with high valuation and thus negatively predicts cross-sectional bond...

Among growing concerns about potential financial stability risks posed by the asset management industry, herding has been considered as an important risk amplification channel. In this paper, we examine the extent to which institutional investors herd in their trading of U.S. corporate bonds and...

Portfolio trading, a recent innovation in the corporate bond market, involves trading a basket of bonds as a single piece of risk with a single market-maker. Using a proprietary dataset of portfolio inquiries, we train a machine learning algorithm to identify portfolio trades in TRACE. Using...

Using a comprehensive database of corporate news, we find that bond funds trade against the direction of news sentiment. The trading against news phenomenon is concentrated in funds selling on positive news and in the post-financial crisis period when dealer liquidity provision is constrained....

This study investigates the determinants of trading activity in the U.S. corporate bond market, focusing on the effects of Seasonal Affective Disorder (SAD) and macroeconomic announcements. Employing the General-to-Specific (Gets) Autometrics methodology, we identify distinct behavioral...

This paper examines the information contents of trading activities in the corporate bond market prior to earnings announcements. We find that the direction of pre-announcement bond trading is significantly related to earnings surprises. Such linkage is most evident prior to negative news and in...

We find substantial herding in U.S. corporate bonds among bond fund managers, much higher than that previously documented for the equity market. Herding is generally stronger among illiquid bonds, and buy herding and sell herding are driven by different factors. In particular, sell herding...

I document an abnormal increase in the price of default insurance for target firms at the time of an activist hedge fund intervention, despite an abnormal decrease in expected default losses. After the intervention, credit spreads remain abnormally high for confrontational activist campaigns but...