Common Equity Factors in Corporate Bond Markets

Abstract: Over the past 40 years finance theories have evolved from simple single-factor models to more complex multifactor models. Initially, the Capital Asset Pricing Model (CAPM) postulated that equity markets can be described by a single factor (market beta). The basic premise of the model is that market participants require a risk premium for investing in high-beta assets that are typically considered more risky than low-beta assets.