Are adjustments in the default risk premium asymmetric?

Mark Thompson

Applied Economics, 2007, vol. 39, issue 21, 2693-2698

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.

Date: 2007
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DOI: 10.1080/00036840600749797

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