“How Risky is the U.S. Corporate Sector?” by Dr. Ivan Shalistovich
Dr. Ivan Shalistovich
Wisconsin School of Business
University of Wisconsin–Madison
Utilizing novel market data on corporate bonds we measure the aggregate market value of U.S. corporate assets and their payouts to investors. Total asset payouts are very volatile, turn negative when corporations raise capital, and in contrast to procyclical cash payouts are acyclical. This challenges the notion of risk and return since the risk premium on corporate assets is comparable to the standard equity premium. To reconcile this evidence, we show that aggregate net issuances, which are acyclical and highly volatile, mask a strong exposure of total payouts' cash components to low-frequency growth risks. We develop an asset-pricing framework to quantitatively assess this economic channel.