2 edition of Is systematic default risk priced in equity returns? found in the catalog.
Is systematic default risk priced in equity returns?
Jorge A. Chan-Lau
by International Monetary Fund, Monetary and Financial Systems Dept. in Washington, D.C
Written in English
This paper finds that systematic default risk, or the event of widespread defaults in the corporate sector, is an important determinant of equity returns. Moreover, the market price of systematic default risk is one order of magnitude higher than the market price of other risk factors. In contrast to studies by Fama and French (1993, 1996 ) and Vassalou and Xing (2004), this paper uses a market-based measure of systematic default risk. The measure is constructed using price information from credit derivatives prices, namely the spreads of standardized single-tranche collateralized debt obligations on credit derivatives indices.
|Statement||prepared by Jorge A. Chan-Lau.|
|Series||IMF working paper -- WP/06/148|
|Contributions||International Monetary Fund. Monetary and Financial Systems Dept.|
|The Physical Object|
|Pagination||16 p. :|
|Number of Pages||16|
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Equity Risk Premium Definition | Investopedia. School of Economics and Management Department of Business Administration FEKN90 Business Administration- Degree Project Master of Science in Business and Economics.
is not only the default risk which built into default spread but also a systematic risk, hence making default spread a poor predictor of returns for stocks carrying default risk (V assalou & Xing. Equity price risk is the risk that arises from security price volatility – the risk of a decline in the value of a security or a portfolio.
Equity price risk can be either systematic or Author: Steven Nickolas. Equity risk premium refers to the excess return that investing in the stock market provides over a risk-free rate.
This excess return compensates investors for taking on the relatively higher risk.