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Are adjustments in the default risk premium asymmetric?

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  • Mark Thompson

Abstract

This article employs threshold cointegration and error-correction models to the default risk premium. The approach allows asymmetry in the dynamic process that has not been captured in previous studies of corporate credit spreads. The results indicate that the adjustment process is asymmetric and would be beneficial to investors and macroeconomic forecasters as the default risk premium may signal future business cycles.

Suggested Citation

  • Mark Thompson, 2007. "Are adjustments in the default risk premium asymmetric?," Applied Economics, Taylor & Francis Journals, vol. 39(21), pages 2693-2698.
    • Handle: RePEc:taf:applec:v:39:y:2007:i:21:p:2693-2698
    DOI: 10.1080/00036840600749797
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    Cited by:

    1. Pekka Mannonen & Elias Oikarinen, 2013. "Risk premium, macroeconomic shocks, and information technology: an empirical analysis," International Review of Applied Economics, Taylor & Francis Journals, vol. 27(5), pages 695-705, September.
    2. Shawkat Hammoudeh & Mohan Nandha & Yuan Yuan, 2013. "Dynamics of CDS spread indexes of US financial sectors," Applied Economics, Taylor & Francis Journals, vol. 45(2), pages 213-223, January.
    3. Liu, Tengdong & Hammoudeh, Shawkat & Thompson, Mark A., 2013. "A momentum threshold model of stock prices and country risk ratings: Evidence from BRICS countries," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 27(C), pages 99-112.

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