PT  - JOURNAL ARTICLE
AU  - Attakrit Asvanunt
AU  - Scott Richardson
TI  - The Credit Risk Premium
AID  - 10.3905/jfi.2017.26.3.006
DP  - 2016 Dec 31
TA  - The Journal of Fixed Income
PG  - 6--24
VI  - 26
IP  - 3
4099  - https://pm-research.com/content/26/3/6.short
4100  - https://pm-research.com/content/26/3/6.full
AB  - Despite theoretical and intuitive reasons for a credit risk premium, past research has found little supporting empirical evidence. This is primarily attributable to biases in computing credit excess returns, which improperly account for term risk. Using data spanning 80 years in the United States and nearly 20 years in Europe, the authors find strong evidence of a credit risk premium after correctly adjusting for term risk. The credit risk premium is not spanned by other known risk premia, and it exhibits time variation related to economic growth and aggregate default rates. These results have important implications for asset pricing and investment decisions.TOPICS: Analysis of individual factors/risk premia, credit risk management, developed