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Firm characteristics, economic conditions and policy regimes are the key determinants that most researchers have used to explain corporate bond yield spreads. In this article, we examine whether monetary policy shocks are also important determinants given their ability to affect default risk, risk aversion and liquidity premiums. Using a Vector Autoregression (VAR) with long-run monetary neutrality, we find that monetary policy shocks do, in fact, account for a large portion of the variation in corporate bond yield spreads.

We apply an option-pricing framework to the ex-dividend behavior of common stocks. The framework explains the observed behavior of positive returns on the ex-dividend day and predicts that ex-dividend day returns will be higher for firms with greater financial leverage. Empirical testing supports the prediction. In contrast to prior studies, we find that dividendcapture activity has no significant impact on ex-dividend behavior, and we offer an explanation based on the importance of tick intervals.

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