Chava, Sudheer; Purnanandam, Amiyatosh - In: Review of Financial Studies 23 (2010) 6, pp. 2523-2559
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...