The Survival Discount and the Contagion Premium

59 Pages Posted: 4 Mar 2019 Last revised: 7 Jan 2021

See all articles by Michela Altieri

Michela Altieri

Luiss Guido Carli

Giovanna Nicodano

University of Turin - Department ESOMAS; Collegio Carlo Alberto; EGCI; Netspar

Date Written: December 27, 2019


In our model, companies with lower survival rates display an ex-post premium relative to those with higher survival rates, due to missing defaulted companies. Thus, one can estimate the survivorship bias by comparing company types with different survival rates, like conglomerates and focused firms. We find that the conglomerate discount drops from 12.3% to 2.4% as survival probability falls. Moreover, lower-survival conglomerates display a 15% contagion premium. These patterns are absent at the time of conglomerate formation, when there is no survivorship bias. We conclude that stock prices do not reflect the ex-ante expected value of companies with heterogeneous mortality.

Keywords: survivorship bias, default, coinsurance, contagion, conglomerate discount

JEL Classification: G1, G14, G3

Suggested Citation

Altieri, Michela and Nicodano, Giovanna, The Survival Discount and the Contagion Premium (December 27, 2019). European Corporate Governance Institute (ECGI) - Finance Working Paper No. 600/2019, Available at SSRN: or

Michela Altieri (Contact Author)

Luiss Guido Carli ( email )

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Giovanna Nicodano

University of Turin - Department ESOMAS ( email )

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