In search of systematic distress risk
Grant Data
Project Title
In search of systematic distress risk
Principal Investigator
Dr Zhang, Shaojun
(Principal Investigator (PI))
Co-Investigator(s)
Professor Hou Kewei
(Co-Investigator)
Duration
23
Start Date
2015-08-01
Amount
319151
Conference Title
In search of systematic distress risk
Presentation Title
Keywords
cross-section of returns, distress risk, equity premium, idiosyncratic risks, systematic risks
Discipline
Finance
Panel
Business Studies (B)
HKU Project Code
17502015
Grant Type
General Research Fund (GRF)
Funding Year
2015
Status
Completed
Objectives
1) Construct a firm-level dataset with accounting and stock market information, as well as macro variables and market risk factors. 2) Construct a measure of market-level distress risk. Compare the aggregate measure at the annual frequency to actual bankruptcy and liquidation data from other data sources. In addition, relate market-level distress risk to business cycles and business conditions. 3) Decompose firm-level distress risk into a systematic component and an idiosyncratic component. 4) Explore whether and how the systematic distress risk is priced in the cross-section of stock returns. To establish a risk-adjustment benchmark and for robustness purposes, we further control for other existing risk factors. 5) Test the pricing of idiosyncratic distress risk in stock returns. We relate to the literature on the pricing of other idiosyncratic risks (e.g. idiosyncratic volatility).