Why some Distressed Firms Have Low Expected Returns"

In recent years, empirical researchers show that the higher credit risk, the lower the cross-sectional average stock returns. Although it seems that this result is puzzling in a standard financial pricing theory, we show that, in a production based model with a zero-coupon bond, negative correlation between credit risk and expected stock return can be plausible.

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Year of publication:	2007-07
Authors:	Kobayashi, Takao ; Ikeda, Ryoichi
Institutions:	Center for International Research on the Japanese Economy (CIRJE), Faculty of Economics

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Series:	CIRJE F-Series.
Type of publication:	Book / Working Paper
Notes:	Number CIRJE-F-504 21 pages
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10004999315