Measuring Corporate Bond Mortality and Performance

Measuring Corporate Bond Mortality and Performance ABSTRACT 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 for the first four years after issuance, with BB‐rated securities outperforming all others thereafter. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Finance Wiley

Measuring Corporate Bond Mortality and Performance

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Publisher
Wiley
Copyright
1989 The American Finance Association
ISSN
0022-1082
eISSN
1540-6261
D.O.I.
10.1111/j.1540-6261.1989.tb02630.x
Publisher site
See Article on Publisher Site

Abstract

ABSTRACT 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 for the first four years after issuance, with BB‐rated securities outperforming all others thereafter.

Journal

The Journal of FinanceWiley

Published: Sep 1, 1989

References

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