Survival and Pricing Puzzles

Michela Altieri and Giovanna Nicodano

No 604, Carlo Alberto Notebooks from Collegio Carlo Alberto

Abstract: This paper argues that imperfect information concerning defaulted companies generates pricing puzzles. We show that companies with higher survival display a discount relative to lower survival ones, when they differ only in mortality. Consistent with this argument, we find that discounted diversified conglomerates survive more, on average, than focused firms. The conglomerate discount widens from 5.6% to 13.3% when measured on companies with increasing survival probability.

Keywords: survivorship bias; asset pricing; market efficiency; diversification discount; parent company discount (search for similar items in EconPapers)
JEL-codes: G14 G3 (search for similar items in EconPapers)
Pages: pages 60
Date: 2020
New Economics Papers: this item is included in nep-ore
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Persistent link: https://EconPapers.repec.org/RePEc:cca:wpaper:604

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