The finance literature looks at a number of factors to explain risk premia in corporate debt, such as liquidity effects …, jump-to-default risk, and contagion risk. Stochastic re-covery rates as a source of systematic risk have not received much … that differently-ranking debt instruments of the same issuer face identical default risk but different default …

While empirical literature has documented a negative relation between default risk and stock returns, theory suggests …. In accordance with theory, we find that the systematic part, measured as the PD sensitivity to aggregate default risk, is … that default risk should be positively priced. In this paper, we calculate monthly probabilities of default (PDs) for a …

We merge the literature on downside return risk and liquidity risk and introduce the concept of extreme downside … same time when the market liquidity (return) is lowest. This effect is not driven by linear or downside liquidity risk or … extreme downside return risk and is mainly driven by more recent years. There is no premium for stocks whose liquidity is …

A unified explanation of risk and mispricing in stock returns underpinned by their aggregate liquidity risk is … liquidity risk or betting on it. A three-factor model capturing these return variations is developed. Results show that our … liquidity risk hedging. The imposition of stringent temporal restrictions on competing factor models shows that our model leads …

' economic fundamentals. Accordingly, the findings corroborate an agency theory explanation for the impact of distress risk on … relationship between short-term changes in financial distress risk and future stock price crashes. This result is economically …-fixed effect estimations, and alternative definitions of distress and crash risk measures; they are also robust to a range of tests …

This study extends the Grullon, Michaely and Swaminathan (2002) analysis by incorporating default risk. Using data for … default risk. This reduction is shown to be a priced risk factor beyond the Fama and French (1993) risk measures, and that it … analysis reveals that the reduction in default risk is a significant factor in explaining the three-year excess returns …

, credit risk, dispersion, idiosyncratic volatility, and capital investments derive their profitability from taking short … positions in high credit risk firms that experience deteriorating credit conditions. In contrast, the value-based strategy … derives most of its profitability from taking long positions in high credit risk firms that survive financial distress and …

, credit risk, dispersion, idiosyncratic volatility, and capital investments derive their profitability from taking short … positions in high credit risk firms that experience deteriorating credit conditions. Such distressed firms are highly illiquid … emerges from taking long positions in high credit risk firms that survive financial distress and subsequently realize high …

, credit risk, dispersion, idiosyncratic volatility, and capital investments derive their profitability from taking short … positions in high credit risk firms that experience deteriorating credit conditions. In contrast, the value-based strategy … derives most of its profitability from taking long positions in high credit risk firms that survive financial distress and …