This paper shows theoretically and empirically that beta- and volatility-based low risk anomalies are driven by return … default risk. With increasing downside risk, the standard capital as- set pricing model increasingly overestimates required … equity returns relative to firms' true (skew-adjusted) market risk. Empirically, the profitability of betting against beta …

This paper analyzes the influence of downside risk on defaultable bond returns. By introducing a defaultable bond …-trading model, we show that the decline in market risk tolerance and information accuracy leads to trading loss under downside … conditions. Our empirical analysis indicates that downside risk can explain a large proportion of the variation in yield spreads …

exposure to systematic mispricing can bias tests of risk-return tradeoffs. Controlling for systematic mispricing, we recover … robust positive risk-return relations for many cross-sectional risk proxies, including low-risk and distress anomalies. We … arising from empirical failures of standard pricing models, and show empirical risk-return relations supporting rational …

Historical evidence like the global financial crisis from 2007-09 highlights that sector concentration risk can play an … II consider only name concentration risk explicitly in their solvency capital requirements for asset concentration risk … and neglect sector concentration risk. We show by means of US insurers' asset holdings from 2009 to 2018 that substantial …

risk factors. Risk factor correlation increases when investor sentiment worsens. This suggests that corporate bond … investors change their perception of risk factors, which results in higher risk factor correlation and finally higher bond …

aggregate risk premia. Building on the idea that corporate debt, while safe in normal times, is exposed to the risk of economic … depression, this paper embeds a trade-off theory of capital structure into a real business cycle model with a small, time …-varying risk of large economic disaster. This simple feature generates large, volatile and countercyclical credit spreads as well …