Topic:Inflation, Default, and Cross-Sectional Corporate BondReturns

Lecturer:Zhogang Song

Zhaogang Song is a professor of finance at Johns Hopkins University's Carey School of Business. He is mainly engaged in academic research on financial markets and real estate finance, focusing on asset prices, market structure and liquidity, non-bank financial intermediation, fintech, monetary policy, China's financial markets and financial econometrics. Journal of Finance, Journal of Monetary Economics.Journal of Financial Economics, Journal of Financial Economics, Research articles are published in major academic journals such as Review of Financial Studies and Journal of Econometrics. He has received the NASDAQ Award for Best Paper on Market Microstructure, the Best Paper on Empirical Econometrics, the Dennis J.Aigner Honor Award, the Q Group Research Award, the Global Association of Risk Professionals Research Award, and the Montreal Institute for Structured Products and Derivatives Research Award.

Abstract:

Inflation risk exposure, as measured by the return beta with respect to changes in long-term inflation swap rate, has significantly positive effect on cross-sectional variations of corporate bond excess returns.This effect remains the same for excess returns over duration-matched Treasury bond returns, showing that inflation beta mainly affects the default component of corporate bond returns. We then analyze how two channels of inflation-default association--debt deflation and inflation procyclicality-affect the pricing effects of inflation exposure for corporate bond returns. Further analyses on short-term inflation swap rate and time-varying risk aversion indicate the importance of long-term inflation expectation.

Time:2:30-3:30p.m,August 6th,2024

Venue:B336,Zhixin Building,Central Campus