Is Corporate Bond Market Performance Connected with Stock Market Performance?

During the last decade, fi nancial research exhibited and highlighted four key features of corporate bonds. First, holding corporate bonds in a portfolio of assets is advocated by the related potential growth, the historical low risk as compared to stocks, and the related diversifi cation benefi ts with the enlargement of effi cient asset portfolio opportunities (Siegel, 2002). Second, there exists a strong trade-off between corporate bond markets and equity markets (e.g., fi xed income arbitrage as reported by Duarte and al., 2005). Indeed, equity data and features have been widely used to assess some corporate bond determinants such as credit risk indicators for example (Carr and Wu, 2005; Collin-Dufresne and al., 2001; Cremers and al., 2005, 2008; Hull and al., 2003; Merton, 1974;1 Vassalou and Xing, 2003; Zhang and al., 2005).