Measuring Corporate Bond Mortality and Performance
This study develops an alternative way to measure default risk and suggests an appropriate method to assess the performance of fixed-income investors over the entire spectrum of credit-quality classes. The approach seeks to measure the expected mortality of bonds and the consequent loss rates in a manner similar to the way actuaries assess mortality of human beings. The results show that all bond ratings outperform riskless Treasuries over a ten-year horizon and that, despite relatively high mortality rates, B-rated and CCC-rated securities outperform all other rating categories of the first four years after issuance, with BB-rated securities outperforming all others thereafter. Copyright 1989 by American Finance Association.
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Volume (Year): 44 (1989)
Issue (Month): 4 (September)
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