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Survival and Pricing Puzzles

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  • Michela Altieri
  • Giovanna Nicodano

Abstract

This paper argues that imperfect information concerning defaulted companies generates pricing puzzles. We show that companies with higher survival display a discount relative to lower survival ones, when they differ only in mortality. Consistent with this argument, we find that discounted diversified conglomerates survive more, on average, than focused firms. The conglomerate discount widens from 5.6% to 13.3% when measured on companies with increasing survival probability.

Suggested Citation

  • Michela Altieri & Giovanna Nicodano, 2020. "Survival and Pricing Puzzles," Carlo Alberto Notebooks 604, Collegio Carlo Alberto.
    • Handle: RePEc:cca:wpaper:604
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    More about this item

    Keywords

    survivorship bias; asset pricing; market efficiency; diversification discount; parent company discount;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G3 - Financial Economics - - Corporate Finance and Governance

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