RT Journal Article SR Electronic T1 When a Fact May Not Be a Fact—and So What? An Analysis of Credit Default Statistics JF The Journal of Fixed Income FD Institutional Investor Journals SP 38 OP 45 DO 10.3905/jfi.2018.28.3.038 VO 28 IS 3 A1 Chris Dialynas YR 2018 UL https://pm-research.com/content/28/3/38.abstract AB Statistics envelop conclusions with an aura of certainty. However, the output of decision making is only as good as the input and, for investors, this is a critical truism. This article examines credit analysis and the annual default and recovery statistics from rating agencies, presented by rating category on an annual basis as well as cumulatively over a prescribed period. The statistics are very important inputs to many facets of the investment process because they purportedly represent the default rate over a particular period and the probability-adjusted recovery of principal for a specific investment category. This study’s findings show, however, that currently reported default statistics are misleading due to the absence of bailout inputs. The persistence of central bank intrusions into financial markets and policymakers’ concern for “financial conditions” and the associated wealth effects have served to finance government budget deficits and private debt at very low interest rates, making credit default inputs less reliable.TOPICS: Information providers/credit ratings, fixed income and structured finance, quantitative methods