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Is the value premium really compensation for distress risk?

13-05-2011 | Research | Joop Huij, PhD, Wilma de Groot, CFA This study provides a comprehensive investigation of the relation between the value anomaly and distress risk. Using risk measures based on accounting models, structural models, credit spreads and credit ratings, we find no relation between the value premium and distress risk. Our findings are inconsistent with the notion that the value effect is a compensation for distress risk.
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Author

Joop Huij, PhD
Head of Factor Investing Research


Author

Wilma de Groot, CFA
Senior Portfolio Manager