Journal of Financial Economics Vol. 83 No. 3 2007
Multi-period corporate default prediction with stochastic covariates
open access
Abstract
We provide maximum likelihood estimators of term structures of conditional probabilities of corporate default, incorporating the dynamics of firm-specific and macroeconomic covariates. For US Industrial firms, based on over 390,000 firm-months of data spanning 1980 to 2004, the term structure of conditional future default probabilities depends on a firm's distance to default (a volatility-adjusted measure of leverage), on the firm's trailing stock return, on trailing S&P 500 returns, and on US interest rates. The out-of-sample predictive performance of the model is an improvement over that of other available models.
- DOI
- 10.1016/j.jfineco.2005.10.011
- Volume
- 83
- Issue
- 3
- Pages
- 635-665
- Language
- en
- Sources
- crossref bibtex:phds-export.bib openalex