Topic: Inflation, Default, and Corporate Bond Returns
Speaker: Zhaogang Song, Professor of Finance, Carey Business School, Johns Hopkins University
Time: 10:00am-11:30am, December 25
Location: 4-101
Abstract:
We find that systematic inflation exposure—measured by the beta with respect to change in long-term inflation swap rate—positively affects corporate bond returns in the cross section significantly, with the effect totally bearing on the credit excess returns over the duration-matched Treasury returns. Consistent with the previously-documented negative inflation—default relation in the data, inflation betas of the credit excess returns are mostly positive, implying that corporate bonds provide protection against rising inflation. Further, higher-default-risk bonds have more positive inflation betas. We also explore the channels of the negative inflation— default relation in regard to the effect of inflation beta.
Speaker Biography:
Zhaogang Song joined the Johns Hopkins Carey Business School in 2015 and has been a Professor of Finance in the research track since 2022. He worked as an Economist at the Board of Governors of the Federal Reserve System in Washington DC from 2011 to 2015. He holds a BA in Management Science and Engineering and a MA in Finance from Shandong University, China, and a PhD in Finance from Cornell University.
Song's main research interests are in asset pricing, financial Intermediation, market microstructure, monetary policy, and financial econometrics. He has published research papers in various academic journals including the Journal of Finance, Review of Financial Studies, Journal of Financial Economics, Journal of Monetary Economics, Journal of Econometrics, and Management Science among others. Song's research has won several awards, including the NASDAQ Best Paper Award in Market Microstructure, the Dennis J. Aigner Honorable Mention for the best paper in empirical econometrics published by the Journal of Econometrics, the Q Group Research Award, the Research Award of the Global Association of Risk Professionals, and the Research Award of the Montreal Institute of Structured Products and Derivatives, among others.
In addition to academic research, Zhaogang Song actively involves in both policy issues on financial markets and investment practice in the financial industry. He served as an academic expert for the US Commodity Futures Trading Commission (CFTC) from 2018 to 2019 and is currently a consultant for the Dimensional Fund Advisors (DFA) since 2022. He has also been a visiting scholar at the Federal Reserve Bank of Philadelphia. He published articles in practitioners and policy outlets including the Journal of Investment Management and the Liberty Street Economics of the Federal Reserve Bank of New York.
