What drives short-term credit spreads: credit risk, liquidity risk, or both? Despite a large empirical literature on corporate yield spreads, very few studies have examined this important question. Using a novel data set of secondary market transaction prices of Chinese commercial papers, we...

There is no consensus on whether macroeconomic fundamentals have any predictive power for bond risk premia, either unconditionally or conditionally over bond yields. Using Adaptive Group LASSO, a machine learning algorithm, we are able to construct a new, parsimonious macro variable that is...

This paper investigates predictions of structural credit risk models for interest rate sensitivities of corporate bond returns. Recent evidence has shown that the existing models fail to capture this sensitivity (a stylized fact referred to as the interest rate sensitivity puzzle). We propose...