Scandinavian Working Papers in Economics
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The Economic Research Institute, Stockholm School of Economics SSE/EFI Working Paper Series in Business Administration

No 2009:7:
Returns to Defaulted Corporate Bonds

Håkan Thorsell ()

Abstract: I test for short term excess return in a sample of 279 defaulted US corporate bonds using multiple regression analysis. There are robust excess returns after controlling for market and liquidity risk. The expected recovery rate during 2001-2006 is estimated to be, on average, four percentage points lower the first month after default than the present value of the recovery rate after nine months.

Keywords: Bond pricing; Recovery rate; (follow links to similar papers)

33 pages, March 23, 2009

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