Default and Idiosyncratic Risk Anomalies Revisited

42 Pages Posted: 15 Nov 2011

See all articles by Björn Bick

Björn Bick

Goethe University Frankfurt

Christian W. Hirsch

University of Frankfurt; Leibniz Institute for Financial Research SAFE

Holger Kraft

Goethe University Frankfurt

Yildiray Yildirim

Zicklin School of Business, Baruch College - The City University of New York

Date Written: September 30, 2011

Abstract

This paper studies the default anomaly that has been documented in the literature. We show that after controlling for the default-risk premium the default anomaly disappears. In contrast, controlling for credit spreads does not fully eliminate the anomaly. We also relate our results to the IVOL anomaly and find evidence that this anomaly disappears when one controls for default risk via the default-risk premia.

Keywords: Risk Premium, Default Risk, Fama-French Regressions, IVOL anomaly

JEL Classification: G10, G12

Suggested Citation

Bick, Björn and Hirsch, Christian W. and Kraft, Holger and Yildirim, Yildiray, Default and Idiosyncratic Risk Anomalies Revisited (September 30, 2011). Available at SSRN: https://ssrn.com/abstract=1960006 or http://dx.doi.org/10.2139/ssrn.1960006

Björn Bick

Goethe University Frankfurt ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

Christian W. Hirsch

University of Frankfurt ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany
+49 69 798 33704 (Phone)
+49 69 798 33901 (Fax)

Leibniz Institute for Financial Research SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

Holger Kraft (Contact Author)

Goethe University Frankfurt ( email )

Faculty of Economics and Business Administration
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

Yildiray Yildirim

Zicklin School of Business, Baruch College - The City University of New York ( email )

55 Lexington Ave., Box B13-260
New York, NY 10010
United States

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