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Thursday, May 7, 2020 | History

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

Is systematic default risk priced in equity returns?

a cross-sectional analysis using credit derivatives prices

by Jorge A. Chan-Lau

  • 355 Want to read
  • 29 Currently reading

Published by International Monetary Fund, Monetary and Financial Systems Dept. in Washington, D.C .
Written in English

    Subjects:
  • Default (Finance) -- Econometric models.,
  • Risk -- Econometric models.,
  • Credit derivatives -- Prices -- Econometric models.,
  • Corporations -- Valuation -- Econometric models.

  • About the Edition

    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.

    Edition Notes

    Statementprepared by Jorge A. Chan-Lau.
    SeriesIMF working paper -- WP/06/148
    ContributionsInternational Monetary Fund. Monetary and Financial Systems Dept.
    The Physical Object
    Pagination16 p. :
    Number of Pages16
    ID Numbers
    Open LibraryOL19269795M


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Is systematic default risk priced in equity returns? by Jorge A. Chan-Lau Download PDF EPUB FB2

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.