Abstract

https://ssrn.com/abstract=297972
 


 



Book-to-Market Equity, Distress Risk, and Stock Returns


John M. Griffin


University of Texas at Austin - Department of Finance

Michael L. Lemmon


University of Utah - Department of Finance


Journal of Finance, Vol. 57, October 2002

Abstract:     
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.

Keywords: book-to-market, stock returns, distress risk

JEL Classification: G12, G14


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Date posted: February 19, 2002  

Suggested Citation

Griffin, John M. and Lemmon, Michael L., Book-to-Market Equity, Distress Risk, and Stock Returns. Journal of Finance, Vol. 57, October 2002. Available at SSRN: https://ssrn.com/abstract=297972

Contact Information

John M. Griffin
University of Texas at Austin - Department of Finance ( email )
Red McCombs School of Business
Austin, TX 78712
United States
512-471-6621 (Phone)
HOME PAGE: http://www.jgriffin.info

Michael L. Lemmon (Contact Author)
University of Utah - Department of Finance ( email )
David Eccles School of Business
Salt Lake City, UT 84112
United States
801-585-5210 (Phone)
801-581-7214 (Fax)
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