Birge and Zhang (2018) reported that combining common factors models with functions of the default risk improves models' performance to... Show moreBirge and Zhang (2018) reported that combining common factors models with functions of the default risk improves models' performance to explain stock returns. Default risk contains firm specific information and may help to explain momentum premium that compensates investors for the firm specific risk exposures. In this paper, we confirmed that the forward-looking measure of default risk, as proposed by Birge and Zhang (2018), seems to capture some pricing information in the momentum premium. This provides an alternative to explain the underlying risks associated with the momentum strategy. Show less
