Staff Reports
Measuring Corporate Bond Market Dislocations
Number 957
January 2021 Revised July 2021

JEL classification: G12, G19, C43, E37

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

We propose the Corporate Bond Market Distress Index (CMDI) to quantify corporate bond market dislocations in real time. The index takes a preponderance-of-metrics perspective to combine a broad set of measures of market functioning from primary and secondary markets but not driven by any one statistic. We document that the index correctly identifies periods of dislocations and predicts future realizations of commonly used measures of market distress, while the converse is not the case. Moreover, the CMDI is an economically and statistically significant predictor of future economic activity, even after controlling for standard predictors, including credit spreads.

Available only in PDF
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.
By continuing to use our site, you agree to our Terms of Use and Privacy Statement. You can learn more about how we use cookies by reviewing our Privacy Statement.   Close