TY - JOUR
T1 - U.S. leveraged loan and debt markets
T2 - Implications for optimal portfolio and hedging
AU - Abakah, Emmanuel Joel Aikins
AU - Nasreen, Samia
AU - Tiwari, Aviral Kumar
AU - Lee, Chien Chiang
N1 - Publisher Copyright:
© 2023 Elsevier Inc.
PY - 2023/5
Y1 - 2023/5
N2 - This paper offers fresh empirical evidence on the relationship between leverage loans and US debt markets by investigating the distributional predictability and directional predictability between leveraged loans and treasury bonds, fixed income securities and corporate bonds in the U.S economy. We use daily price data from January 2013 to April 2021. First, we analyze the causal relationship between variables by applying non-parametric causality-in-quantiles test and find that quantile causality in variance shows the stronger impact of leverage loan market returns on US debt market returns over the entire quantile range. Second, quantile dependence and directional predictability between leverage loan market and US debt markets are analyzed by applying cross-quantilogram approach and estimated results show the heterogeneous quantile relations from leverage loan market to US debt market. Moreover, the cross-quantile correlation results demonstrate the evidence of negative predictability from leverage loan market to US debt market in low, medium and high quantile range. These evidences are important for US investors and portfolio managers.
AB - This paper offers fresh empirical evidence on the relationship between leverage loans and US debt markets by investigating the distributional predictability and directional predictability between leveraged loans and treasury bonds, fixed income securities and corporate bonds in the U.S economy. We use daily price data from January 2013 to April 2021. First, we analyze the causal relationship between variables by applying non-parametric causality-in-quantiles test and find that quantile causality in variance shows the stronger impact of leverage loan market returns on US debt market returns over the entire quantile range. Second, quantile dependence and directional predictability between leverage loan market and US debt markets are analyzed by applying cross-quantilogram approach and estimated results show the heterogeneous quantile relations from leverage loan market to US debt market. Moreover, the cross-quantile correlation results demonstrate the evidence of negative predictability from leverage loan market to US debt market in low, medium and high quantile range. These evidences are important for US investors and portfolio managers.
KW - Debt markets
KW - Leverage loans
KW - Nonlinear dependence
KW - Quantile dependence
KW - U.S economy
UR - http://www.scopus.com/inward/record.url?scp=85148346724&partnerID=8YFLogxK
U2 - 10.1016/j.irfa.2023.102514
DO - 10.1016/j.irfa.2023.102514
M3 - Article
AN - SCOPUS:85148346724
SN - 1057-5219
VL - 87
JO - International Review of Financial Analysis
JF - International Review of Financial Analysis
M1 - 102514
ER -