Survival and Pricing Puzzles

65 Pages Posted: 4 Mar 2019 Last revised: 7 Jan 2020

See all articles by Michela Altieri

Michela Altieri

Vrije Universiteit Amsterdam

Giovanna Nicodano

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

Date Written: December 27, 2019


This paper studies the informativeness of stock prices, after some companies have defaulted. We show that the average price of companies in the stock market exceeds the average value of surviving plus defaulted companies. This price-value wedge is narrower for company types with higher survival. The latter thus display a discount relative to lower survival types, even when they differ only in mortality. Thus, a ”‘pricing puzzle”’ stems from the different company survival. Consistent with this argument, we find that discounted diversified conglomerates survive more, on average, than focused companies. This holds after adding the usual controls for the discount, including age. 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

JEL Classification: G32, D23, K19

Suggested Citation

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

Michela Altieri (Contact Author)

Vrije Universiteit Amsterdam ( email )

De Boelelaan 1105
Amsterdam, ND North Holland 1081 HV

Giovanna Nicodano

University of Turin - Department ESOMAS ( email )

Turin, 10134

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Collegio Carlo Alberto ( email )

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Torino, Torino 10121
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EGCI ( email )

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Netspar ( email )

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