TY  - JOUR
AU  - Giesecke,Kay
AU  - Longstaff,Francis A.
AU  - Schaefer,Stephen
AU  - Strebulaev,Ilya
TI  - Corporate Bond Default Risk: A 150-Year Perspective
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 15848
PY  - 2010
Y2  - March 2010
UR  - http://www.nber.org/papers/w15848
L1  - http://www.nber.org/papers/w15848.pdf
N1  - Author contact info:
Kay Giesecke
Stanford University
E-Mail: giesecke@stanford.edu

Francis Longstaff
UCLA
Anderson Graduate School of Management
110 Westwood Plaza, Box 951481
Los Angeles, CA  90095-1481
Tel: 310/825-2218
Fax: 310/206-5455
E-Mail: francis.longstaff@anderson.ucla.edu

Stephen Schaefer
London Business School
Regents Park
London, NW14SA
United Kingdom
E-Mail: sschaefer@london.edu

Ilya A. Strebulaev
Graduate School of Business
Stanford University
655 Knight Way
Stanford, CA 94305
Tel: 650/725-8239
Fax: 650/725-7979
E-Mail: istrebulaev@stanford.edu
AB  - We study corporate bond default rates using an extensive new data set spanning the 1866–2008 period. We find that the corporate bond market has repeatedly suffered clustered default events much worse than those experienced during the Great Depression. For example, during the railroad crisis of 1873–1875, total defaults amounted to 36 percent of the par value of the entire corporate bond market. We examine whether corporate default rates are best forecast by structural, reduced-form, or macroeconomic credit models and find that variables suggested by structural models outperform the others. Default events are only weakly correlated with business downturns. We find that over the long term, credit spreads are roughly twice as large as default losses, resulting in an average credit risk premium of about 80 basis points. We also find that credit spreads do not adjust in response to realized default rates.
ER  -