TY - JOUR T1 - Defaulted Bond Returns by Seniority Class JF - The Journal of Fixed Income SP - 50 LP - 57 DO - 10.3905/jfi.2002.319324 VL - 12 IS - 2 AU - Martin S. Fridson AU - Yan Gao Y1 - 2002/09/30 UR - https://pm-research.com/content/12/2/50.abstract N2 - Analysis of data has indicated that the customary relationship between risk and reward was inverted in the market for defaulted bonds during the period January 1980-July 1992. The less risky senior issues produced higher returns than the riskier subordinated issues. An update of the analysis for August 1994 through March 2000 shows that the anomaly became less pronounced than in the earlier period. This change does not necessarily demonstrate learning on the part of investors. It may have resulted from a general increase in recovery of creditors' claims at the conclusion of bankruptcy. The authors find a relationship, apparently not reported previously, between the length of time between default and emergence from bankruptcy and the percentage payoff of claims on emergence. ER -