RETRACTED: Common risk factors in the cross-section of corporate bond returns

(In)frequently Traded Corporate Bonds

“…The returns of the (I)TBs that move to states with higher trading frequency are about 12 basis points per month higher compared to the (I)TBs that stay in the same trading frequency state. We show that the exposure to Bai, Bali, and Wen (2018) risk factors does not explain these returns. Abnormal excess returns of the (I)TBs jumping to higher trading frequency states are of the same magnitude and statistically significant.…”

“…In Chapter V we work with bond returns that are recognized using Bai et al (2018) approach. First, we calculate volume-weighted daily (dirty) prices from the tick-by-tick TRACE data.…”

“…Here we first compute value-weighted return time series for 25 bond baskets based on all combinations of five trading frequency states in the previous and in the current month. 7 We regress each of these 25 time series on 4 time series of Bai et al (2018) pricing factors and extract alphas. 8 All 25 estimated alphas are presented in Table XXII in Appendix C, Figure 10 presents the same result in a more intuitive form.…”

Regulatory Capital and Portfolio Investments: Evidence from Life Insurance Companies

“…To clean the raw data of TRACE, I use the code provided by Jens Dick-Nielsen on his website and follow Edwards, Harris, and Piwowar (2007) in addition to reach the full set of trade-volume weighted transaction prices (clean prices that exclude accrued interests) from July, 2002 to the end of year 2015. 45 With the clean prices of bond transactions, I locate month-end prices for each security, following Bai, Bali, and Wen (2018). In the processed TRACE sample, for each security at each quarter end, I keep the 8-digit CUSIP, quarter-end price, and the month-end prices for the next 12 months.…”

“…49 Bonds that mature within one year are subject to price fluctuation that is independent of their fundamentals, i.e., due to institutional investors' preference. See Bai et al (2018) for detailed discussions.…”