Risk and return in international corporate bond markets

Corporate bond returns in major developed economies increase with lower ratings and higher residual maturity. The performance of various factor models featuring corporate, sovereign equity markets as factors suggests that the corporate plays a dominant role explaining variation returns. From model perspective, local contribute substantially more than global factors. exposures show intuitive patterns: worsen, ?’s steeply, decline monotonically hockey stick pattern. However, from pricing we find little evidence against CAPM model.