Topic: The Private Premium in Public Bonds

Speaker: Chenyang Wei, Director, Head of Credit Research, American International Group (AIG)

Date: December 9th (Wednesday.)

Time: 10:00-11:30pm

Location: Building 4, Room 101

Language: English

Abstract:

This paper is the first to document a private premium in public bonds.  We find that spreads are 30 basis points higher for public bonds of private companies than for bonds of public companies, even after controlling for observable differences, including detailed financial performance measures. The estimated private premium increases to 40 to 50 basis points when propensity matching methodology is used or when we control for fixed issuer effects.  In contrast, in the same sample, there is no difference in pricing in private debt (syndicated loans).  Overall,  consistent with theories on the informational sensitivity of different security classes, the “private premium” uncovered in the public bond market appear to reflect the importance of information costs.

About the speaker:

Chenyang Wei holds the Director, Head of Credit Research of AIG Investments Risk. He is also a Research Fellow at the University of Pennsylvania, and a Fellow at the Wharton Financial Institutions Center. Previously, Dr. Wei spent five years as economist in the Federal Reserve Bank of New York. He received a Ph.D. in Finance from the New York University in 2006. Dr. Wei’s key responsibilities include the monitoring and analyzing Macro and demographics trends, global residential/commercial real estate market, banking/corporate credit, and sovereign. He has articles published in the Economic Policy Review, and the Review of Financial Studies, among others.