Ward, David J. and Gary L. Griepentrog, "Risk and Return in Defaulted Bonds", Financial Analysts Journal, Vol. 49, No. 3, (May/June 1993), pp. 61-65.

Abstract: Risk and return measures compiled from a database that includes over 750 defaulted bond issues provide a risk-return profile of defaulted bonds over the 1972-1991 period. Similar measures for investments in long-term U.S. government bonds, corporate bonds, the S&P500 and small stocks provide a basis for comparing relative risk and return characteristics.

Investments in defaulted bonds produced excess returns over the entire period. The level of excess returns diminished over the 20-year period, however, suggesting that efficient market forces eventually worked to decrease early abnormal returns. Investments in defaulted bonds have return and total risk measures similar to those of equity. However, the systematic risk component of defaulted bonds is lower than that of equity and closer to that of corporate bonds.