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Is the value premium really compensation for distress risk?

Is the value premium really compensation for distress risk?

13-05-2011 | Research

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.

  • Joop  Huij
    Joop
    Huij
    Head of Factor Investing Research
  • Wilma de Groot
    Wilma
    de Groot
    Director, Portfolio Manager Quantitative Equities

Our findings are inconsistent with the notion that the value effect is a compensation for distress risk.

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