Staff Reports
Measuring Corporate Bond Market Dislocations
Number 957
January 2021

JEL classification: G12, G19, C43, E37

Authors: Nina Boyarchenko, Richard K. Crump, Anna Kovner, and Or Shachar

We measure dislocations in the market for corporate bonds in real time with the Corporate Bond Market Distress Index (CMDI), allowing for the aggregation of a broad set of measures of market functioning from primary and secondary bond markets into a single measure. The index quantifies dislocations from a preponderance-of-metrics perspective, ensuring that the measure of market distress is not driven by any one statistic. We document that the index correctly identifies periods of dislocations, is robust to alternative choices of the aggregation procedure, and provides differential predictive information for future real outcomes relative to common spread measures.

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AUTHOR DISCLOSURE STATEMENT(S)
Nina Boyarchenko
I declare that I have no relevant or material financial interests that relate to the research described in my paper entitled “Measuring Corporate Bond Market Dislocations,” joint with Richard Crump, Anna Kovner, and Or Shachar. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.

Richard K. Crump
I declare that I have no relevant or material financial interests that relate to the research described in my paper entitled “Measuring Corporate Bond Market Dislocations,” joint with Nina Boyarchenko, Anna Kovner, and Or Shachar. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.

Anna Kovner
I declare that I have no relevant or material financial interests that relate to the research described in my paper entitled “Measuring Corporate Bond Market Dislocations,” joint with Nina Boyarchenko, Richard Crump, and Or Shachar. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.

Or Shachar
I declare that I have no relevant or material financial interests that relate to the research described in my paper entitled “Measuring Corporate Bond Market Dislocations,” joint with Nina Boyarchenko, Richard Crump, and Anna Kovner. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
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