TY - JOUR T1 - The Credit Risk Premium JF - The Journal of Fixed Income SP - 6 LP - 24 DO - 10.3905/jfi.2017.26.3.006 VL - 26 IS - 3 AU - Attakrit Asvanunt AU - Scott Richardson Y1 - 2016/12/31 UR - https://pm-research.com/content/26/3/6.abstract N2 - Despite theoretical and intuitive reasons for a credit risk premium, past research has found little supporting empirical evidence. This is primarily attributable to biases in computing credit excess returns, which improperly account for term risk. Using data spanning 80 years in the United States and nearly 20 years in Europe, the authors find strong evidence of a credit risk premium after correctly adjusting for term risk. The credit risk premium is not spanned by other known risk premia, and it exhibits time variation related to economic growth and aggregate default rates. These results have important implications for asset pricing and investment decisions.TOPICS: Analysis of individual factors/risk premia, credit risk management, developed ER -