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Distressed Stocks in Distressed Times
Abstract
Financially distressed stocks do not underperform healthy stocks when the entire economy is in distress. The asset beta and financial leverage of distressed stocks rise significantly after market downturns, resulting in a dramatic increase in equity beta. Hence, a long/short healthy-minus-distressed trading strategy leads to significant losses when the market rebounds. Managing this risk mitigates the severe losses of financial-distress...
Paper Details
Title
Distressed Stocks in Distressed Times
Published Date
Jan 1, 2015
Journal
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