Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/114679
Authors: 
Ford, John K.
Year of Publication: 
1994
Citation: 
[Journal:] Journal of Small Business Finance [ISSN:] 1057-2287 [Volume:] 3 [Year:] 1994 [Issue:] 3 [Pages:] 249-260
Abstract: 
A major difficulty in determining the appropriate risk premium for lending to small businesses is the lack of market value information. This paper develops a mean-variance model that uses available failure rate data to establish a benchmark risk premium for lending to firms in specific industries. This model incorporates the benefits of diversifying across firms and industries. This paper also presents evidence that a random walk model provides the best forecast of future failure rates.
Subjects: 
Small Business
Loan Pricing
Interest rates
Borrowing
JEL: 
G32
L25
G33
Document Type: 
Article

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