Economics at your fingertips  

Misvaluation and Return Anomalies in Distress Stocks

Assaf Eisdorfer, Amit Goyal () and Alexei Zhdanov
Additional contact information
Assaf Eisdorfer: University of Connecticut
Alexei Zhdanov: Pennsylvania State University

No 12-12, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: Return anomalies are most pronounced among distressed stocks. We attribute this finding to the role of misvaluation and investors' inability to value distressed stocks correctly. We treat distressed stocks as options and construct a valuation model that explicitly takes into account the value of the option to default (or abandon the firm). We show that anomalies exist only among the subset of distressed stocks classified as misvalued by our model. There is little evidence that more misvalued stocks are harder to arbitrage than less misvalued stocks.

Keywords: Financial Distress; Return Anomalies; Misvaluation (search for similar items in EconPapers)
JEL-codes: G12 G13 G33 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2012-03
New Economics Papers: this item is included in nep-cfn and nep-fmk
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link) (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this paper

More papers in Swiss Finance Institute Research Paper Series from Swiss Finance Institute Contact information at EDIRC.
Bibliographic data for series maintained by Ridima Mittal ().

Page updated 2020-02-21
Handle: RePEc:chf:rpseri:rp1212