Nbook-to-market equity distress risk and stock returns

Abstract this paper examines the relationship between book. Oscore, the difference in returns between high and low booktomarket securities is more than twice as large as that in other firms. Among firms with the highest distress risk as proxied by ohlsons 1980. Consistent with mispricing arguments, firms with high distress risk exhibit the largest return reversals around earnings announcements, and the booktomarket. Booktomarket equity, distress risk, and stock returns by. The booktomarket ratio is the book value of equity divided by market value of equity. At the center of this controversy is the booktomarket ratio, which our study. Proponents of the distress risk interpretation of booktomarket equity argue that firms with high beme tend to be distressed firms with poor earnings prospects, and that investors rationally attach a high discount rate to these firms. Consistent with mispricing arguments, firms with high distress risk exhibit the largest return reversals around earnings announcements, and the bookto market.

Booktomarket equity, distress risk, and stock returns by john m. The impact of financial distress risk on equity returns. Does booktomarket equity proxy for distress risk or. Griffin and lemmon 2002, dichev 1998, garlappi and yan 2011 campbell. Booktomarket equity, distress risk, and stock returns columbia. Booktomarket equity, distress risk, and stock returns jstor. Booktomarket ratio definition the business professor. The distressed firms in the highbeme portfolios tend to have high. They report that distress risk is negatively priced. Booktomarket equity, distress risk, and stock returns. Among firms with the highest distress risk as proxied by ohlsons 1980 oscore, the difference in returns between high and low booktomarket securities is more than twice as large as that in other firms. This paper examines the relationship between booktomarket equity, distress risk, and stock returns. If we interpret the booktomarket ratio as a proxy for distress risk, it makes no sense to exclude these negative be stocks. Does booktomarket equity proxy for distress risk or overreaction.