The Investment Performance of Defaulted Bonds for 1987-95 and Market Outlook

26 Pages Posted: 11 Nov 2008

See all articles by Edward I. Altman

Edward I. Altman

New York University (NYU) - Salomon Center; New York University (NYU) - Department of Finance

Multiple version iconThere are 3 versions of this paper

Date Written: 1995

Abstract

This report presents a discussion of the investment performance of those bonds that have defaulted and continue trading in the public market while the issuing firm attempts a financial reorganization. Monthly total returns measures are compiled based on the Altman-NYU Salomon Center Index of Defaulted Debt Securities and compared with the total returns of common stocks and high yield bonds. Returns based on our market weighted index are presented for the past year, 1995, as well as the nine year period 1987-1995. 1995 was a modest year of performance for defaulted bonds especially when compared to our two other risky indexes and to risk free government bonds. The return performance of our three indexes for the nine year sample period shows that common stocks are now the number one performer with defaulted bonds in second place followed by high yield bonds. All three asset classes have done quite well in the last decade. Diversification and seasonal movements are also analyzed in this report. Finally, current and future supply estimates for the defaulted and distressed market are presented.

Suggested Citation

Altman, Edward I., The Investment Performance of Defaulted Bonds for 1987-95 and Market Outlook (1995). NYU Working Paper No. FIN-95-005, Available at SSRN: https://ssrn.com/abstract=1298312

Edward I. Altman (Contact Author)

New York University (NYU) - Salomon Center ( email )

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New York University (NYU) - Department of Finance ( email )

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