Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/260027 
Year of Publication: 
2016
Series/Report no.: 
Working Paper No. 2011:38
Publisher: 
Lund University, School of Economics and Management, Department of Economics, Lund
Abstract: 
This paper disentangles the complexity of the distress risk premium in stock returns using the risk-neutral measure of credit risk (valued by CDS spread) and investigates the relationship between credit risk and the market , size, value, and momentum effects. Consistent with the argument for a negative distress premium, firms with higher credit risk have lower stock returns, and a positive value effect is concentrated in high credit quality firms. However, credit risk is positively priced in returns on stocks that won the most in the past year and that, during crisis, co-moved the most with the market. A positive momentum effect is concentrated in high credit risk firms. Furthermore, the size effect, but not the value effect, could be attributed to a positive credit risk effect.
Subjects: 
Asset pricing
equity returns
size effect
value effect
momentum effect
credit risk effect
credit default swap
JEL: 
G01
G11
G12
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.