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Author: Spencer Arnott Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
This thesis addresses a fundamental topic in financial economics: the effects of distress risk in the cross section of equities returns. Initial results show that both raw and risk-adjusted excess returns are rising in distress risk, and the remainder of this thesis examines the general robustness of the distress premium. Accordingly, the additional excess returns to stocks having heightened levels of financial distress are contingent upon the stock price being low. These findings are then extended to demonstrate that these same stocks are also microcap firms, thus attributing the anomalous behaviour of distressed stocks to a common factor with many other market anomalies. The economic implication is that arbitrage profits are likely to be limited due to the high transaction costs alongside the limited investment capacity with associated low-priced, microcap stocks.
Author: Spencer Arnott Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
This thesis addresses a fundamental topic in financial economics: the effects of distress risk in the cross section of equities returns. Initial results show that both raw and risk-adjusted excess returns are rising in distress risk, and the remainder of this thesis examines the general robustness of the distress premium. Accordingly, the additional excess returns to stocks having heightened levels of financial distress are contingent upon the stock price being low. These findings are then extended to demonstrate that these same stocks are also microcap firms, thus attributing the anomalous behaviour of distressed stocks to a common factor with many other market anomalies. The economic implication is that arbitrage profits are likely to be limited due to the high transaction costs alongside the limited investment capacity with associated low-priced, microcap stocks.
Author: Michael S. O'Doherty Publisher: ISBN: Category : Languages : en Pages : 35
Book Description
Several prior studies use reduced-form models of bankruptcy or default risk to proxy for corporate distress and find evidence of a significant negative relation between distress risk and average returns. This paper introduces a substantially broader measure of firm failure risk, the probability a firm is delisted from a major U.S. stock exchange for performance reasons, and revisits the pricing of distressed stocks. In contrast to the prior literature, I find distressed stocks earn higher average returns than those with a low probability of failure. Moreover, distress risk is significantly priced in the cross section. While the size and value effects remain robust to controlling for failure risk, I find evidence that SMB and HML contain some distress-related information.
Author: Qingyi (Freda) Song Drechsler Publisher: ISBN: Category : Languages : en Pages : 47
Book Description
This paper explores the asset pricing impact of financial distress and idiosyncratic volatility on cross-sectional stock returns. We show that the puzzling negative correlation between idiosyncratic volatility and return is a manifestation of financial distress. Using daily and monthly return data from 1971 to 2006, we show that while the volatility spread is -1.68% for the most distressed stocks, it is actually positive and significant at 0.61% per month for the least distressed ones. This indicates that financial distress has a more fundamental impact on the cross-sectional returns than idiosyncratic volatility. As volatility is one of the inputs in the measurement of distress, we address the potential endogenous relationship between distress and idiosyncratic volatility using various robustness checks. Moreover, in a horse-race comparison under the Fama-MacBeth firm-level regression set up, financial distress takes away the explanatory power of idiosyncratic volatility on cross-sectional stock returns. Interaction of financial distress with other asset-pricing anomalies, including momentum and value effects, is also explored. It is shown that the momentum effect is mostly driven by the group of most distressed stocks. And similarly, the value effect is the strongest among this group of stocks.
Author: John M. Griffin Publisher: ISBN: Category : Languages : en Pages :
Book Description
This paper examines the relationship between book-to-market equity, distress risk, and stock returns. Among firms with the highest distress risk as proxied by Ohlson's (1980) O-score, the difference in returns between high and low book-to-market securities is more than twice as large as that in other firms. This large return differential cannot be explained by the three-factor model or by differences in economic fundamentals. Consistent with mispricing arguments, firms with high distress risk exhibit the largest return reversals around earnings announcements, and the book-to-market effect is largest in small firms with low analyst coverage.
Author: John Y. Campbell Publisher: ISBN: Category : Languages : en Pages : 47
Book Description
This paper explores the determinants of corporate failure and the pricing of financially distressed stocks using US data over the period 1963 to 2003. Firms with higher leverage, lower profitability, lower market capitalization, lower past stock returns, more volatile past stock returns, lower cash holdings, higher market-book ratios, and lower prices per share are more likely to file for bankruptcy, be delisted, or receive a D rating. When predicting failure at longer horizons, the most persistent firm characteristics, market capitalization, the market-book ratio, and equity volatility become relatively more significant. Our model captures much of the time variation in the aggregate failure rate. Since 1981, financially distressed stocks have delivered anomalously low returns. They have lower returns but much higher standard deviations, market betas, and loadings on value and small-cap risk factors than stocks with a low risk of failure. These patterns hold in all size quintiles but are particularly strong in smaller stocks. They are inconsistent with the conjecture that the value and size effects are compensation for the risk of financial distress.
Author: Wing-Keung Wong Publisher: Mdpi AG ISBN: 9783036530802 Category : Business & Economics Languages : en Pages : 232
Book Description
The Efficient Market Hypothesis believes that it is impossible for an investor to outperform the market because all available information is already built into stock prices. However, some anomalies could persist in stock markets while some other anomalies could appear, disappear and re-appear again without any warning. A Special Issue on "Efficiency and Anomalies in Stock Markets" will be devoted to advancements in the theoretical development of market efficiency and anomaly in the Stock Market, as well as applications in Stock Market efficiency and anomalies.
Author: N. Cakici Publisher: Springer ISBN: 1137359072 Category : Business & Economics Languages : en Pages : 347
Book Description
Risk and Return in Asian Emerging Markets offers readers a firm insight into the risk and return characteristics of leading Asian emerging market participants by comparing and contrasting behavioral model variables with predictive forecasting methods.
Author: Reinhard Mechler Publisher: Springer ISBN: 3319720260 Category : Science Languages : en Pages : 563
Book Description
This book provides an authoritative insight on the Loss and Damage discourse by highlighting state-of-the-art research and policy linked to this discourse and articulating its multiple concepts, principles and methods. Written by leading researchers and practitioners, it identifies practical and evidence-based policy options to inform the discourse and climate negotiations. With climate-related risks on the rise and impacts being felt around the globe has come the recognition that climate mitigation and adaptation may not be enough to manage the effects from anthropogenic climate change. This recognition led to the creation of the Warsaw International Mechanism on Loss and Damage in 2013, a climate policy mechanism dedicated to dealing with climate-related effects in highly vulnerable countries that face severe constraints and limits to adaptation. Endorsed in 2015 by the Paris Agreement and effectively considered a third pillar of international climate policy, debate and research on Loss and Damage continues to gain enormous traction. Yet, concepts, methods and tools as well as directions for policy and implementation have remained contested and vague. Suitable for researchers, policy-advisors, practitioners and the interested public, the book furthermore: • discusses the political, legal, economic and institutional dimensions of the issue• highlights normative questions central to the discourse • provides a focus on climate risks and climate risk management. • presents salient case studies from around the world.
Author: Spencer Arnott
Author: Spencer Arnott
Author: Michael S. O'Doherty
Author: Qingyi (Freda) Song Drechsler
Author: John M. Griffin
Author: Tze Chuan Ang
Author: John Y. Campbell
Author: Dirk Hackbarth
Author: Wing-Keung Wong
Author: N. Cakici
Author: Reinhard Mechler