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Is Default Event Risk Priced in Corporate Bonds?
Open accessAbstract
This article provides an empirical decomposition of the default, liquidity, and tax factors that determine expected corporate bond returns. In particular, the risk premium associated with a default event is estimated. The intensity-based model is estimated using bond price data for 104 US firms and historical default rates. Significant risk premia on common intensity factors and important tax and liquidity effects are found. These components go a long way towards explaining the level of expected corporate bond returns. Adding a positive default event risk premium helps to explain the remaining error, although this premium cannot be estimated with high statistical precision.
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Cited by
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Gilchrist, S., & Zakrajšek, E. (2012) · American Economic Review · doi:10.1257/aer.102.4.1692 · Cited by 2,213
Capital structure, credit risk, and macroeconomic conditions
Hackbarth, D., Miao, J., & Morellec, E. (2006) · Journal of Financial Economics · doi:10.1016/j.jfineco.2005.10.003 · Cited by 678
Corporate bond default risk: A 150-year perspective
Giesecke, K., Longstaff, F. A., Schaefer, S., & Strebulaev, I. (2011) · Journal of Financial Economics · doi:10.1016/j.jfineco.2011.01.011 · Cited by 300
Regulatory Pressure and Fire Sales in the Corporate Bond Market
Ellul, A., Jotikasthira, P., & Lundblad, C. T. (2010) · SSRN Electronic Journal · doi:10.2139/ssrn.1362182 · Cited by 262
Trust, social capital, and the bond market benefits of ESG performance
Amiraslani, H., Lins, K. V., Servaes, H., & Tamayo, A. (2023) · Review of Accounting Studies · doi:10.1007/s11142-021-09646-0 · Cited by 222
Metadata
- Authors
- Driessen, J.
- Venue
- Review of Financial Studies
- Publisher
- Oxford University Press (OUP)
- Published
- 2004-11-03
- Volume
- 18
- Issue
- 1
- Pages
- 165-195
- ISSN
- 0893-9454 (ISSN-L)
- 1465-7368
- OpenAlex
- W3125149866
- Cited by
- 565
- References
- 0
- FWCI
- 41.79
- Type
- journal article
- Language
- en
- Open access
- green
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