Abstract
The risk-return tradeoff underlies the conceptual framework for the asset pricing model and investment decisions under the efficient markets hypothesis. Many empirical study, however, demonstrate negative relation between credit risk and cross-section of stock returns. The main effort of this study is to attempt detangling the puzzle from the perspective of measurement error by representing the first treatment of a wide class of nonlinear models with discrete variables using instruments. We found measurement error has great impact on the relationship between stock returns and firm's risk of default. In addition, this relation found to be crucially dependent on credit cycles and firm financial status.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
