Choi, Jaewon
[Verfasser:in]
;
Richardson, Matthew P.
[Sonstige Person, Familie und Körperschaft];
Whitelaw, Robert
[Sonstige Person, Familie und Körperschaft]
On the Interest Rate Sensitivity of Corporate Securities
Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments October 7, 2018 erstellt
Beschreibung:
We use contingent claim asset pricing and exploit capital structure priority to better understand the relation between corporate security returns and interest rate changes. We show theoretically and confirm empirically that the interest rate sensitivity, or duration, of a security within a firm's capital structure is monotonically related to the priority of the security. The magnitude of this effect of priority on duration depends on the firm's market leverage. These findings at the firm level have important implications for interpreting the time-varying correlations between the returns on government bonds and those on aggregate stock and debt markets