Credit Spreads Predictability on Norwegian business cycles

Abstract

This thesis examines the predictability of corporate bond credit spreads on Norwegian business cycles. We provide evidence that credit spreads between investment-grade corporate bonds contain significant predictive information for Norwegian business cycles in the three- and six-month horizon. Further, we examine the forecast performance of corporate bond credit spreads over time and argue that their performance depends on the nature of the recessions. In sum, we confirm our hypothesis that credit spreads can be used as leading predictors for Norwegian business cycles.