| dc.description.abstract | This thesis presents a comprehensive analysis of the credit spread puzzle in the Norwegian
corporate bond market, a topic that has been largely unexplored since 2015. Focusing
on the period from 2014 to 2023, we aim to quantify the extent of the puzzle, identify
additional risk premiums demanded by investors, and explore the factors driving these
premiums. Our analysis of 30,647 transactions reveals that the median proportion of
actual credit spreads explained by default models is 28 percent. We observe sector-specific
variations, with industrial, oil, and shipping sectors showing significant mispricing. Our
findings indicate that Norwegian investors seek additional compensation for sector-specific
risks, particularly in the volatile industrial, oil, and shipping sectors, and for bonds from
smaller issuers. A notable size premium is evident, especially in sectors susceptible to
economic downturns. The study also suggests a substantial liquidity premium, challenging
to quantify due to the market’s illiquid nature. The research contributes to understanding
the Norwegian corporate bond market’s complexities, highlighting the nuanced nature of
bond pricing beyond what standard models can explain. | en_US |
