Systemic Default Probability and Return Predictability: Evidence from China

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This package contains all code needed to compute systemic default probabilities for China's A-share nonfinancial firms and to reproduce every table and figure in the paper. The pipeline estimates firm-level asset values and volatilities via an iterative Merton model, extracts common shocks through PCA, calculates joint default probabilities using dynamic programming, and runs predictive regressions for equity and bond returns.

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