High-yield bond default and call risks
Article Abstract:
A study of the conditions leading to high-yield bond defaults and call behavior was conducted. The investigation utilized a competing risk hazard model that simultaneously computes the effect of issue-specific attributes, the prevailing business conditions and bond age. The results indicate the existence of nonmonotonic aging effects. These include an increase in default rates followed by a decline while call rates increase and then taper off. Defaults are likely during worsening economic conditions with no sign of recovery.
Publication Name: Review of Economics and Statistics
Subject: Mathematics
ISSN: 0034-6535
Year: 1999
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An investigation of the risk and return relation at long horizons
Article Abstract:
A study of the projected returns on stocks and their conditional volatility over time and the varying state of the nation's economy is conducted. Monte Carlo integration and seminonparametric density estimation were the methodologies used to obtain the results. The findings indicate the presence of a substantial positive risk in terms of return for long-term holding periods of one or two years. The negative risks described in the literature are shown to be due to possible misspecification.
Publication Name: Review of Economics and Statistics
Subject: Mathematics
ISSN: 0034-6535
Year: 1999
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Hedging winner's curse with multiple bids: evidence from the Portuguese treasury bill auction
Article Abstract:
The use of multiple bidding techniques to adjust for the effect of winner's curse is analyzed using bidding information from treasury bill auctions conducted in Portugal. The hypothesis states that a bidder submits a larger number of bids with widely dispersed bidding amounts when there is a high probability for winner's curse. The practice is further encouraged by an increased volatility in the interest rates and the number of participating well-informed bidders.
Publication Name: Review of Economics and Statistics
Subject: Mathematics
ISSN: 0034-6535
Year: 1999
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