Abstract
While many market participants look to high yield bond markets as either a leading indicator of credit performance or as simply lagging equities, this paper tests for leading or lagging relationships among the daily returns of high yield, investment grade and equity markets. No clear lead or lag between the investment grade bond market and high yield issues in Europe is found. European high yield issues tend to lag US high yield bond markets, and are also inclined to lag US equity performance. A simple timing model that attempts to exploit the high yield bond/equity market lag is tested.
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