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In search of distress risk in China's stock market

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  • Gao, Li
  • He, Wei
  • Wang, Qian

Abstract

We examine the significance of size, book-to-market, and momentum factors in capturing financial distress risk in China's stock market. Consistent with the market underreaction hypothesis, we find that the momentum factor proxies for distress risk in China's stock market and that the explanatory power of momentum is subsumed when a distress factor is included in the asset pricing model. Our analysis demonstrates no evidence that size and book-to-market effects are driven by financial distress risk.11This research did not receive any specific grant from funding agencies in the public, commercial, or not-for-profit sectors.

Suggested Citation

  • Gao, Li & He, Wei & Wang, Qian, 2019. "In search of distress risk in China's stock market," Global Finance Journal, Elsevier, vol. 42(C).
    • Handle: RePEc:eee:glofin:v:42:y:2019:i:c:s1044028317302028
    DOI: 10.1016/j.gfj.2018.08.003
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    More about this item

    Keywords

    Financial distress risk; Size effects; Book-to-market effects; Momentum effects;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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