We show in two ways that, ceteris paribus, investors require a positive return premium for taking aggregate distress risk. First, aggregate distress risk correlates positively with future excess stock market returns. Second, stocks that provide a poor hedge against aggregate distress risk have...

This study utilizes recent developments in panel data techniques to evaluate whether the smoothing of pension expenses is neutral in its long-term effect on reported earnings. Adopting a long-term perspective, the empirical analysis also identifies sources of potential deviations. Results...