Default risk in equity returns

• 成果类型: Article; Proceedings Paper
• 署名作者: Vassalou, M; Xing, YH
• 署名单位: Columbia University; Rice University
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/j.1540-6261.2004.00650.x
• 发表日期: 2004
• 页码: 831-868
• 关键词: STOCK RETURNS; industrial-structure; Financial distress; cross-section; bond; bankruptcy; heteroskedasticity; performance; prediction; ratios

摘要

This is the first study that uses Merton's (1974) option pricing model to compute default measures for individual firms and assess the effect of default risk on equity returns. The size effect is a default effect, and this is also largely true for the book-to-market (BM) effect. Both exist only in segments of the market with high default risk. Default risk is systematic risk. The Fama-French (FF) factors SMB and HML contain some default-related information, but this is not the main reason that the FF model can explain the cross section of equity returns.