In Search of Distress Risk

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In Search of Distress Risk

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Title: In Search of Distress Risk
Author: Szilagyi, Jan; Hilscher, Jens; Campbell, John

Note: Order does not necessarily reflect citation order of authors.

Citation: Campbell, John Y., Jens Hilscher, and Jan Szilagyi. 2008. In Search of Distress Risk. Journal of Finance 63, no. 6: 2899-2939.
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Abstract: This paper explores the determinants of corporate failure and the pricing of financially distressed stocks whose failure probability, estimated from a dynamic logit model using accounting and market variables, is high. 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 low failure risk. These patterns are more pronounced for stocks with possible informational or arbitrage-related frictions. They are inconsistent with the conjecture that the value and size effects are compensation for the risk of financial distress.
Published Version: http://dx.doi.org/10.1111/j.1540-6261.2008.01416.x
Other Sources: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=770805
Terms of Use: This article is made available under the terms and conditions applicable to Other Posted Material, as set forth at http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#LAA
Citable link to this page: http://nrs.harvard.edu/urn-3:HUL.InstRepos:3199070
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