Analysis on the Yield Spread Determinants of Enterprise Asset-backed Security in Chinese Securitization Market

Abstract

Chinese domestic securitization market expands dramatically in past few year. The whole securitization market is divided in to three parts, which are Credit ABS, Enterprise ABS and ABN. In this paper, only Enterprise ABS is considered as the subject due to its domination in ABS market. And a GLM model is built in order to examine the price determinants are of Enterprise ABS. The result obtained from the first regression is consistent with relatively mature ABS market, such as US and Europe, which are studied in literature. However, the analysis of variance shows that the model is not accurate enough. Therefore, Full Subset Regression is used in order to remove some variables based on the selection result. After that, the detailed economic explanations of removing some variables are discussed. It is concluded that all the reasons given are highly related to the characteristics of Enterprise ABS. This paper suggests that investor can not only focus on credit rating, they also need to consider many aspects like domestic macroeconomy, guarantor and originator's financial status when making Enterprise ABS investment decision.