Mapping the knowledge domain of default risk prediction and its relationship with stock returns: current trends and future directions

Is default risk priced into stock returns, and how is it explained? This question is of prime importance from the investor's point of view, and contradictory findings are present in the literature. Focusing on emerging economies, the study analyses 193 research articles published between 1993 and February 2024, obtained from the Scopus database and analysed using VOSviewer. The results indicate that this domain has evolved significantly in the last several years, especially after 2008. The research also conducts a content analysis and identifies four main clusters that focus on default prediction, asset-pricing models, portfolio construction strategies, the relationship of default risk with stock returns, Credit default swaps, and the association between bond ratings and returns. All things considered, the study offers an extensive overview for academics and professionals who seek to understand how default risk predicts stock return patterns and how it affects investment strategies.