Title

Two-Step Esitmation of Linear Models with Ordinal Unoberved Variables: The Case of Corporate Bonds

Publication Type

Journal Article

Publication Date

1990

Abstract

This article proposes a two-step method for estimating the impact of bond indenture provisions and other financial variables on the risk and yields of investment-grade and speculative corporate bonds. In the first step, the default risk of bonds is estimated as a function of indenture provisions and the characteristics of bonds and the issuing firms by an ordered probit. In the second step, the effects of default risk and bond characteristics on yields are estimated after a measure of bond default risk is obtained by a conditional-mean method.

Discipline

Business

Research Areas

Finance

Publication

Journal of Business and Economic Statistics

Volume

8

Issue

3

First Page

317

Last Page

325

ISSN

0735-0015

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