In this paper, I examine the effect of equity investor sentiment on the bond market. Sentiment can affect bond returns via two channels. First, in times of high investor sentiment, overvalued equity can lead to firm overinvestment, resulting in a negative impact on bond pricing due to an increase in default risk. Second, overvalued equity attracts capital flow to the equity market from the bond market, which can create a downward pressure on bond pricing. Consistent with these channels, I find that equity investor sentiment exhibits a significant negative relation with contemporaneous bond returns. This effect is stronger for firms that overinvest. Furthermore, I find a positive relation between sentiment and subsequent bond returns, consistent with a return reversal predicted by the capital flow channel (due to the backflow of capital); however, there is no return reversal observed for overinvestment firms. Additionally, I find a negative (but delayed) impact of equity investor sentiment on bond ratings for overinvestment firms, consistent with an increase in default risk of these firms. Overall, my study highlights that the bond market reacts to equity investor sentiment in a rational way, consistent with bond investors’ payoff function.

在本文中，我研究了股票投资者情绪对债券市场的影响。情绪可以通过两个渠道影响债券回报。首先，在投资者情绪高涨的时期，股票估值过高会导致企业过度投资，违约风险增加，从而对债券定价产生负面影响。其次，估值过高的股票会吸引资金从债券市场流向股票市场，这会对债券定价造成下行压力。与这些渠道一致，我发现股票投资者情绪与同期债券回报呈显着负相关。对于过度投资的公司，这种影响更大。此外，我找到一个积极的情绪和关系后续债券收益，符合资本流动渠道预测的收益逆转（由于资本回流）；然而，没有观察到过度投资公司的回报逆转。此外，我发现股票投资者情绪对过度投资公司的债券评级产生负面（但延迟）影响，这与这些公司违约风险的增加是一致的。总的来说，我的研究强调，债券市场以理性的方式对股票投资者的情绪做出反应，与债券投资者的收益函数一致。