推 moneymouse:這裡不是問問題板 若要討論歡迎 但請提出自己的想法 07/21 00:30
Assignment 2 Coverage Ratios and the Yields of 19th Century RR Bonds
It is common, nowadays, to calculate various financial ratios in
conjunction with credit analysis. Among these are the coverage ratio, or
times interest earned ratio, equal to Operating Income (or, EBIT) divided by
Interest Expense. In an accompanying Excel workbook, I have the Yield to
Maturity and various coverage ratios (flipped over, equal to Interest
Expense/Operating Income) , and other information, pertaining to late 19th
century U.S. Railroad bonds (see Appendix 2 for an example of such a
railroad). More specifically, for each month of 1891, I have the Yield to
Maturity, the coverage ratios of up to five distinct classes of bonds, and the
priority of claim for a sample of bond generated as follows: 1.The bond
had to be have at least 10 years remaining term to maturity. 2.The bond
had to be traded in either the Baltimore, Boston, New York or Philadelphia
stock exchange, that month. 3.The bond had to be traded on that
exchange in at least two of the prior twelve months. 4.The company
issuing the bond was not in receivership in either 1890 or 1891. 5.The
company had to have an overall coverage ratio no worse than 1.25
(remember, I've flipped over the coverage ratio, so smaller is more
creditworthy). 6.The bond was a straight bond, i.e., neither an income
bond nor a convertible bond. 7.If the bond was callable, it had to be
trading for less than its call price. 8.If the bond was guaranteed, it had to
be trading mostly based on its own creditworthiness, not much on the
credit enhancement provided by the guarantee. The database is a
sample because I only use the first third of the bonds in my file, by name of
bond.
We can suppose that Yield is higher both as the "prior" and "own"
coverage ratios are higher (see Appendix 2), and also that Yield is higher in
the capital-poor regions of the country. These things suggest a multiple
regression of the following form: Y = + X1 + 2X2 + 3X3 where Y is Yield, is
the
risk-free rate, , 2 and 3 > 0, X1 is the coverage ratio pertaining to
interest on
senior securities, X2 is the coverage ratio pertaining to interest on
senior and
similar securities, and X3 is a dummy variable indicating bonds issued by
railroads in the capital-poor regions of the country.
Your assignment is to estimate the above equation and report your
findings to me in the form of a memo. Also, consider if one or at most two
other X variables should be added to the above equation, from what I
have provided in the dataset.
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