Sung Won Kang
Korean Research Institute
8th FL., Hana Daetoo Securities Bldg., 27-3.
Seoul 150-705 Korea
Institutional Affiliation: Korean Economic Research Institute
NBER Working Papers and Publications
|September 2015||Towards a History of the Junk Bond Market, 1910-1955|
with Peter F. Basile, John Landon-Lane, Hugh Rockoff: w21559
We present a new monthly index of the yield on junk (high yield) bonds from 1910-1955. We then use the index to reexamine some of the main debates about the financial history of the interwar years. A close look at junk bond yields: (1) strengthens the view that the decline in lending standards in the late 1920s was modest at best: (2) casts doubt on the view that the banking crisis that began in 1930 disrupted financial markets because banks liquidated their holdings of risky bonds; (3) strengthens the view that the cost of capital rose substantially in the early 1930s and remained high for the rest of the decade; (4) casts doubt on the view that financial markets entered a liquidity trap in the second half of the 1930s; and (5) strengthens the case for believing that junk bond yields con...