Initial Evidence on the Role of Accounting Earnings in the Bond Market

63 Pages Posted: 7 Jul 2007 Last revised: 26 Jan 2009

See all articles by Peter D. Easton

Peter D. Easton

University of Notre Dame - Department of Accountancy

Steven J. Monahan

University of Utah; INSEAD

Florin P. Vasvari

London Business School

Multiple version iconThere are 2 versions of this paper

Date Written: December 1, 2008

Abstract

We document that: (1) the incidence of bond trade increases during the days surrounding earnings announcements; (2) there is a bond-price reaction to the announcement of earnings; and (3) there is a positive association between annual bond returns and both annual changes in earnings and annual analysts' forecast errors. All of these effects are larger when earnings convey bad news or when the underlying bond is more risky. Taken together, our results suggest that the nonlinear payoff structure of bond securities affects the role of accounting earnings in the bond market

Keywords: Bond Returns, Bond Trade, Earnings, Losses and Call Option

JEL Classification: G12, G32, M41, G34

Suggested Citation

Easton, Peter D. and Monahan, Steven J. and Vasvari, Florin P., Initial Evidence on the Role of Accounting Earnings in the Bond Market (December 1, 2008). Available at SSRN: https://ssrn.com/abstract=997821 or http://dx.doi.org/10.2139/ssrn.997821

Peter D. Easton

University of Notre Dame - Department of Accountancy ( email )

Mendoza College of Business
Notre Dame, IN 46556-5646
United States
574-631-6096 (Phone)
574-631-5127 (Fax)

Steven J. Monahan (Contact Author)

University of Utah ( email )

1645 E Campus Center Dr
Salt Lake City, UT 84112-9303
United States

INSEAD ( email )

Boulevard de Constance
PMLS 1.24
F-7705 Fontainebleau Cedex, 77305
France
+33 1 60 72 92 14 (Phone)
+33 1 60 72 92 53 (Fax)

HOME PAGE: http://www.insead.edu/facultyresearch/faculty/profiles/smonahan/

Florin P. Vasvari

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
766
Abstract Views
2,957
rank
36,831
PlumX Metrics