In search of distress risk in China's stock market |
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| Institution: | 1. School of Finance, Xin Jiang University of Finance and Economics, Urumqi, Xinjiang Province 830012, PR China;2. Iona College, 715 North Avenue, New Rochelle, NY 10583;3. School of Business Administration, Georgia Southwestern State University, Americus, GA 31709, United States |
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| 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.1 |
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