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Hwang, Y., Min, H., McDonald, J., Kim, H. and Kim, B. (2010) Using the Credit Spread as an Option-Risk Factor: Size and Value Effects in CAPM. Journal of Banking and Finance, 34, 2995-3009.
https://doi.org/10.1016/j.jbankfin.2010.07.005

has been cited by the following article:

  • TITLE: Leverage, Default Risk, and the Cross-Section of Equity and Firm Returns

    AUTHORS: Frederick M. Hood III

    KEYWORDS: Default Risk, Distress Risk, Beta Estimation, Value Premium

    JOURNAL NAME: Modern Economy, Vol.7 No.14, December 14, 2016

    ABSTRACT: I examine the two components of default risk and how they relate to stock returns, size, and book-to-market. High default risk firms do not necessarily have high levels of systematic asset risk. I show that the two components of default risk, asset volatility and leverage, are negatively related. I provide evidence that leverage differences across firms are not reflected in equity betas. Therefore, I construct firm returns using estimates of firm’s debt returns. The results indicate that a large part of the value premium and some of the size premium can be explained by differences in leverage across firms.