Thesis on Economic Policy Uncertainty and Macroeconomic News in the Corporate Bond Market


Student thesis: Doctoral Thesis

View graph of relations


Related Research Unit(s)


Awarding Institution
Award date11 Jul 2019


This dissertation is composed of two chapters, both of which are in-depth research on the U.S. corporate bond market.

The first chapter examines the pricing of economic policy uncertainty in cross-sectional corporate bond returns from 2002 to 2017. The empirical evidence shows that bonds with high economic policy uncertainty betas have low expected returns, suggesting that investors require additional reward for holding bonds with negative economic policy uncertainty beta. The negative relationship between expected corporate bond returns and economic policy uncertainty beta appears in all segments of corporate bonds and is robust to controlling for conventional risk factors, bond characteristics and different model specifications. Moreover, economic policy uncertainty has a significantly positive effect on the long-term volatility of corporate bonds.

The second chapter explores the impact of scheduled macroeconomic news announcements on the corporate bond market from July 2002 to June 2017. Several results emerge through estimating the impact of fourteen widely followed macroeconomic news on the various daily US corporate bond portfolios. First of all, good (bad) macroeconomic news tend to have a negative (positive) effect on investment-grade bond returns and a positive (negative) effect on extremely high-yield bond returns. Secondly, nonfarm payroll proves to be the “King of announcements” for the corporate bond market. Thirdly, it seems that information about revisions of the prior release has been incorporated into bond prices on announcement days, yet future revisions fail to be priced in. Fourthly, the news information is fully and quickly reflected in bond prices on the announcement day. Finally, it is found that corporate bond volatility increases on announcement days, whereas the Zero Lower Bound (ZLB) policy has little effect on the conditional volatility.