The DOI matches its Crossref record; 1 of the 1 references it cites were found in a registry or an index.
Is Default Risk Negatively Related to Stock Returns?
Open accessAbstract
We find a positive cross-sectional relationship between expected stock returns and default risk, contrary to the negative relationship estimated by prior studies. Whereas prior studies use noisy ex post realized returns to estimate expected returns, we use ex ante estimates based on the implied cost of capital. The results suggest that investors expected higher returns for bearing default risk, but they were negatively surprised by lower-than-expected returns on high default risk stocks in the 1980s. We also extend the sample compared to prior studies, and find that the evidence based on realized returns is considerably weaker in the 1952-1980 period.
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Cites
The Valuation of Cash Flow Forecasts: An Empirical Analysis
KAPLAN, S. N., & RUBACK, R. S. (1995) · The Journal of Finance · doi:10.1111/j.1540-6261.1995.tb04050.x · Cited by 512
Cited by
Environmental externalities and cost of capital
Chava, S. (2014) · Management Science · doi:10.1287/mnsc.2013.1863 · Cited by 1,851
Self-citationThe implied cost of capital: A new approach
Hou, K., van Dijk, M. A., & Zhang, Y. (2012) · Journal of Accounting and Economics · doi:10.1016/j.jacceco.2011.12.001 · Cited by 561
Time-Varying Risk Premium in Large Cross-Sectional Equity Data Sets
Gagliardini, P., Ossola, E., & Scaillet, O. (2016) · Econometrica · doi:10.3982/ecta11069 · Cited by 278
Metadata
- Authors
- Chava, S., & Purnanandam, A.
- Venue
- Review of Financial Studies
- Publisher
- Oxford University Press (OUP)
- Published
- 2010-01-05
- Volume
- 23
- Issue
- 6
- Pages
- 2523-2559
- ISSN
- 0893-9454 (ISSN-L)
- 1465-7368
- OpenAlex
- W3126089975
- Cited by
- 382
- References
- 1
- FWCI
- 43.14
- Type
- journal article
- Language
- en
- Open access
- green
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