Swank, Thomas A. and Thomas H. Root, "Bonds in Default: Is Patience a Virtue?", Journal of Fixed Income, Vol. 5, No. 1, (June 1995), pp. 26-31.

Introduction: The literature on defaulted securities focuses on default rates for the high-yield universe (Altman [1991][REF]), and the prices of securities prior to default and just prior to the bankruptcy play confirmation (Hradsky and Long [1989]). Altman [1993] also investigates returns on securities during default, and Altman and Eberhart [1994] study the return of defaulted securities by class.

While providing useful information to the investor, these studies do not directly address what happens beyond the confirmation date. To investigate this thoroughly, we priced securities not only during default, but included prices at the bankruptcy plan confirmation date and twelve months later. The two specific questions we want to answer are:

• Did holding a security from its default date to the bankruptcy plan confirmation date produce positive returns?
• Did holding the defaulted security after the confirmation date for a twelve-month period produce positive returns?