volatilities. As corporate bond prices are generally attributable to both credit risk and illiquidity as discussed in Huang and …We document a strong positive cross-sectional relation between corporate bond yield spreads and bond return …, our credit and illiquidity proxies can explain almost three quarters of the yield spread-bond volatility relation with …

risk factors. Risk factor correlation increases when investor sentiment worsens. This suggests that corporate bond … investors change their perception of risk factors, which results in higher risk factor correlation and finally higher bond … is most needed. We examine bond correlation using a broad sample of US corporate bonds. We find bond correlation to be …