TY  - JOUR
AU  - Das,Sanjiv
AU  - Duffie,Darrell
AU  - Kapadia,Nikunj
AU  - Saita,Leandro
TI  - Common Failings: How Corporate Defaults are Correlated
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11961
PY  - 2006
Y2  - January 2006
UR  - http://www.nber.org/papers/w11961
L1  - http://www.nber.org/papers/w11961.pdf
N1  - Author contact info:
Sanjiv Das
Dept. of Finance
Santa Clara University
321E Lucas Hall, 500 El Camino Real
Santa Clara, CA 95053
E-Mail: srdas@scu.edu

Darrell Duffie
Graduate School of Business
Stanford University
Stanford, CA  94305-5015
Tel: 650/723-1976
Fax: 650/725-7979
E-Mail: duffie@stanford.edu

Nikunj Kapadia
Isenberg School of Management
University of Massachusetts
121 Presidents Drive
Amherst, MA 01003
Tel: 413-545-5643
E-Mail: nkapadia@isenberg.umass.edu

Leandro Saita
745 7th Ave.
New York, NY 10019
Tel: 415-518-0461
E-Mail: lsaita@gmail.com
AB  - We develop, and apply to data on U.S. corporations from 1979-2004, tests of the standard doubly-stochastic assumption under which firms'default times are correlated only as implied by the correlation of factors determining their default intensities. This assumption is violated in the presence of contagion or "frailty" (unobservable explanatory variables that are correlated across firms). Our tests do not depend on the time-series properties of default intensities. The  data do not support the joint hypothesis of well specified default intensities and the doubly-stochastic assumption.  There is also some evidence of default clustering in excess of that implied by the doubly-stochastic model with the given intensities.
ER  -