``Bonds for The Long Run? The Rate of Return on Corporate Bonds in Belgium, 1838-1939" 

With J. Annaert and M. Deloof, The Economic History Review

[BibTex] [Earlier Version] [Published Version]

Awarded the French Finance Association (AFFI) Special Commendation of the 2022 Gallais-Hamonno Research Prize in Historical Finance [Link]

Abstract: We investigate corporate bond returns for the period 1838-1939 by compiling a unique new database of 201,000 monthly observations of bonds traded on the Brussels Stock Exchange. The value-weighted annualized total rate of return, net of coupon defaults and taxes, is 4.35% in nominal terms and 2.81% in real terms. Estimates of average returns show that corporate bonds outperformed equities during the entire nineteenth century. We find that the risk-adjusted performance of corporate bonds based on Sharpe ratios exceeds that of equities and sovereign bonds during the corporate bond market's first centennial.

``The Cross-Section of Corporate Bond Returns: Evidence from an Elusive Past" 

[BibTeX], Draft available upon request

Finalist for (1) John Doukas Best PhD Paper Award at EFMA 2023 Meeting and (2) New Researcher Prize at EHS 2023 Meeting

Abstract: Using novel hand-collected data of a preeminent bond market in the pre-OTC era, I provide, for the first time, out-of-sample evidence on cross-sectional determinants of corporate bond returns. I demonstrate that credit quality, short-term reversal, momentum, and book-to-market have significant explanatory power with respect to the cross-section of realized returns for the period 1868 through 1939. In contrast, there is no reliable relation between downside risk, illiquidity, or long-term reversal, and returns. In spanning regressions, factors constructed from credit-quality, illiquidity, short-term reversal, momentum, and book-to-market improve the mean-variance efficient tangency portfolio, but the downside risk and long-term reversal factors do not. Credit factor premiums are generally unrelated to market risks. In all, the findings suggest that most claimed anomalies are a robust and persistent feature of credit returns rather than statistical artifacts resulting from data mining.

``The Corporate Bond Risk Premium: New Data and Evidence from The Origin of Corporate Default"

With J. Annaert and M. Deloof

[BibTeX], Draft Coming Soon

Abstract: This paper produces new long-run estimates of the rate of default during the early history of the corporate bond market. Estimates are obtained using a novel, hand-collected dataset of bonds by firms on the Brussels Stock Exchange, the earliest financial center documenting bond default experience. We find a long-term average default rate of 1.68% per annum for 1838–1939. Credit spreads are roughly thrice as large as default losses, resulting in an average credit risk premium of about 113 basis points. Our findings provide intriguing evidence that historical bonds outside the US were not as safe as previously believed and that the pricing of credit risk by financial markets is consistent over time.