Pub Date : 2022-07-03DOI: 10.1080/10293523.2022.2087357
Elze-Mari Roux, J. de Villiers
ABSTRACT This article studies the effect of real increases in salary on required contribution rates when saving for retirement to maintain a Sustainable Lifestyle Level (SLL). We consider two strategies. The first sets conventional contribution rates, recalculating whenever an increase occurs. This requires smaller initial contribution rates, which then need to be increased later in the employee’s working life. The second strategy requires that a constant contribution rate be maintained that allows for the anticipated increases. This rate requires a substantially higher contribution rate from the start. The result is particularly important for setting appropriate default contribution rates for defined contribution retirement funds.
{"title":"The sustainable lifestyle level: How real salary increases affect adequate retirement provision","authors":"Elze-Mari Roux, J. de Villiers","doi":"10.1080/10293523.2022.2087357","DOIUrl":"https://doi.org/10.1080/10293523.2022.2087357","url":null,"abstract":"ABSTRACT This article studies the effect of real increases in salary on required contribution rates when saving for retirement to maintain a Sustainable Lifestyle Level (SLL). We consider two strategies. The first sets conventional contribution rates, recalculating whenever an increase occurs. This requires smaller initial contribution rates, which then need to be increased later in the employee’s working life. The second strategy requires that a constant contribution rate be maintained that allows for the anticipated increases. This rate requires a substantially higher contribution rate from the start. The result is particularly important for setting appropriate default contribution rates for defined contribution retirement funds.","PeriodicalId":44496,"journal":{"name":"Investment Analysts Journal","volume":"51 1","pages":"172 - 185"},"PeriodicalIF":0.9,"publicationDate":"2022-07-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46882478","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-07-03DOI: 10.1080/10293523.2022.2090056
Aurélie Courdent, D. McClelland
ABSTRACT High-frequency trading (HFT) is a trading method that relies on sophisticated algorithms to analyse markets and execute large numbers of orders within milliseconds. In the last two decades, this new technology has gained traction globally and now accounts for the majority of the trading volume on the Johannesburg Stock Exchange (JSE). Despite the dominance of HFT, studies on the topic have been scarce outside of the United States. This study seeks to examine the effects of HFT on market quality in a South African context. First, the study makes use of a set of proxies for algorithmic trading (AT), namely average trade size, odd-lot volume ratio and trade-to-order volume ratio. Second, panel regressions are used to determine the relationship between these proxies and two measures of market quality (market liquidity and short-term volatility). The study found a strong positive relationship between market liquidity and average trade size but an inverse relationship with the other two AT proxies. Finally, the study confirmed a strong positive relationship with short-term volatility. The study concludes that, overall, AT has a positive impact on market quality, despite carrying the risk of causing instability in certain markets.
{"title":"The impact of algorithmic trading on market quality: Evidence from the Johannesburg Stock Exchange","authors":"Aurélie Courdent, D. McClelland","doi":"10.1080/10293523.2022.2090056","DOIUrl":"https://doi.org/10.1080/10293523.2022.2090056","url":null,"abstract":"ABSTRACT High-frequency trading (HFT) is a trading method that relies on sophisticated algorithms to analyse markets and execute large numbers of orders within milliseconds. In the last two decades, this new technology has gained traction globally and now accounts for the majority of the trading volume on the Johannesburg Stock Exchange (JSE). Despite the dominance of HFT, studies on the topic have been scarce outside of the United States. This study seeks to examine the effects of HFT on market quality in a South African context. First, the study makes use of a set of proxies for algorithmic trading (AT), namely average trade size, odd-lot volume ratio and trade-to-order volume ratio. Second, panel regressions are used to determine the relationship between these proxies and two measures of market quality (market liquidity and short-term volatility). The study found a strong positive relationship between market liquidity and average trade size but an inverse relationship with the other two AT proxies. Finally, the study confirmed a strong positive relationship with short-term volatility. The study concludes that, overall, AT has a positive impact on market quality, despite carrying the risk of causing instability in certain markets.","PeriodicalId":44496,"journal":{"name":"Investment Analysts Journal","volume":"51 1","pages":"157 - 171"},"PeriodicalIF":0.9,"publicationDate":"2022-07-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43533877","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-07-03DOI: 10.1080/10293523.2022.2090079
A. Sayed, A. Charteris
ABSTRACT South Africa is a major commodity exporter, yet it is not clear what impact volatility in commodity prices has on the volatility of its currency. In this study, we examine whether a comprehensive sample of commodities (metals, grains and energy) transmit (or receive) volatility spillovers to (from) the rand exchange rate against the United States dollar for the period January 2000 to May 2022. This study uses the dynamic connectedness and volatility spillover approach of Diebold and Yilmaz (2012, 2014) and Gabauer (2020). Our findings highlight the rand as a net receiver of volatility from almost every commodity examined, with silver and palladium exhibiting the strongest volatility spillover onto the rand. From a transmission perspective, there is some evidence that the rand can be considered a commodity currency for metal exports but there may also be other channels to explain the impact of these commodities on the currency. The results have important implications for policymakers, currency traders and hedgers in commodity markets.
{"title":"Is the rand a commodity currency? A volatility spillover analysis","authors":"A. Sayed, A. Charteris","doi":"10.1080/10293523.2022.2090079","DOIUrl":"https://doi.org/10.1080/10293523.2022.2090079","url":null,"abstract":"ABSTRACT South Africa is a major commodity exporter, yet it is not clear what impact volatility in commodity prices has on the volatility of its currency. In this study, we examine whether a comprehensive sample of commodities (metals, grains and energy) transmit (or receive) volatility spillovers to (from) the rand exchange rate against the United States dollar for the period January 2000 to May 2022. This study uses the dynamic connectedness and volatility spillover approach of Diebold and Yilmaz (2012, 2014) and Gabauer (2020). Our findings highlight the rand as a net receiver of volatility from almost every commodity examined, with silver and palladium exhibiting the strongest volatility spillover onto the rand. From a transmission perspective, there is some evidence that the rand can be considered a commodity currency for metal exports but there may also be other channels to explain the impact of these commodities on the currency. The results have important implications for policymakers, currency traders and hedgers in commodity markets.","PeriodicalId":44496,"journal":{"name":"Investment Analysts Journal","volume":"51 1","pages":"186 - 201"},"PeriodicalIF":0.9,"publicationDate":"2022-07-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43929837","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-04-03DOI: 10.1080/10293523.2022.2084222
Mehak Younus, Hilal Anwar Butt
ABSTRACT We compared classic and contemporary asset pricing factor models in explaining anomalous returns in the Pakistani stock market using a sample of 290 companies listed on the Pakistan Stock Exchange. We replicated 54 anomalies with a successful replication rate of 31.5%. We also replicated the factors of chosen factor models, including Fama and French's three-, five-, and six-factor models and an alternate six-factor model; Hou, Xue, and Zhang's q-factor model and an alternate q-factor model; and Stambaugh and Yuan's mispricing factor model and an alternate mispricing factor model. The performance of the factor models is tested using various time-series tests. We found that there is no clear winner in explaining anomalous returns, and we require other approaches to test the models’ abilities in explaining anomalies in Pakistan.
本文以290家在巴基斯坦证券交易所上市的公司为样本，比较了经典和现代资产定价因子模型在解释巴基斯坦股票市场异常收益方面的作用。我们复制了54个异常，成功复制率为31.5%。我们还复制了所选因素模型的因素，包括Fama和French的三因素、五因素和六因素模型以及另一种六因素模型;Hou, Xue, and Zhang的q-factor模型和另一个q-factor模型;以及Stambaugh和Yuan的错误定价因素模型和另一个错误定价因素模型。使用各种时间序列测试来测试因子模型的性能。我们发现在解释异常收益方面没有明确的赢家，我们需要其他方法来测试模型在解释巴基斯坦异常方面的能力。
{"title":"Performance of factor models in explaining anomalous return patterns: Evidence from Pakistan","authors":"Mehak Younus, Hilal Anwar Butt","doi":"10.1080/10293523.2022.2084222","DOIUrl":"https://doi.org/10.1080/10293523.2022.2084222","url":null,"abstract":"ABSTRACT We compared classic and contemporary asset pricing factor models in explaining anomalous returns in the Pakistani stock market using a sample of 290 companies listed on the Pakistan Stock Exchange. We replicated 54 anomalies with a successful replication rate of 31.5%. We also replicated the factors of chosen factor models, including Fama and French's three-, five-, and six-factor models and an alternate six-factor model; Hou, Xue, and Zhang's q-factor model and an alternate q-factor model; and Stambaugh and Yuan's mispricing factor model and an alternate mispricing factor model. The performance of the factor models is tested using various time-series tests. We found that there is no clear winner in explaining anomalous returns, and we require other approaches to test the models’ abilities in explaining anomalies in Pakistan.","PeriodicalId":44496,"journal":{"name":"Investment Analysts Journal","volume":"51 1","pages":"143 - 155"},"PeriodicalIF":0.9,"publicationDate":"2022-04-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43511669","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-04-03DOI: 10.1080/10293523.2022.2076379
Asil Azimli
ABSTRACT This paper examines whether returns on 49 different industry portfolios in the United States (US) expose significantly to the US economic policy uncertainty (EPU) even after controlling for the market and firm-specific risk factors. We find that the US EPU can load significantly against the returns of 15 industry portfolios which include stocks from heavy manufacturing and export dependent industries. However, further asset pricing tests show that the US EPU cannot improve the ability of a benchmark model to capture average industry returns. Additionally, the impact of EPU is time-dependent and significant only during specific periods which are different for each industry. Using a portfolio analysis, we also test whether EPU can forecast future returns. Results imply that the return-EPU relationship is almost flat.
{"title":"Economic policy uncertainty and industry portfolio returns in the United States","authors":"Asil Azimli","doi":"10.1080/10293523.2022.2076379","DOIUrl":"https://doi.org/10.1080/10293523.2022.2076379","url":null,"abstract":"ABSTRACT This paper examines whether returns on 49 different industry portfolios in the United States (US) expose significantly to the US economic policy uncertainty (EPU) even after controlling for the market and firm-specific risk factors. We find that the US EPU can load significantly against the returns of 15 industry portfolios which include stocks from heavy manufacturing and export dependent industries. However, further asset pricing tests show that the US EPU cannot improve the ability of a benchmark model to capture average industry returns. Additionally, the impact of EPU is time-dependent and significant only during specific periods which are different for each industry. Using a portfolio analysis, we also test whether EPU can forecast future returns. Results imply that the return-EPU relationship is almost flat.","PeriodicalId":44496,"journal":{"name":"Investment Analysts Journal","volume":"51 1","pages":"108 - 126"},"PeriodicalIF":0.9,"publicationDate":"2022-04-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48864986","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-04-03DOI: 10.1080/10293523.2022.2076373
Karam Kim, Doojin Ryu, Jinyoung Yu
ABSTRACT We examine whether sentiment indices predict individual firms’ stock returns and evaluate the performances of sentiment-based trading strategies in the Korean equity market. We find that the sentiment indices (constructed using the principal component analysis (PCA) and overnight stock returns) positively predict stock price movements, whereas news sentiment does not significantly determine future stock returns. A comparison of portfolio performances among sentiment indices reveals that the long-short equity strategy based on PCA sentiment changes yields the highest return – a result that is not explained by well-known risk factors. Moreover, investors may earn even greater returns by employing multiple sentiment measures when constructing portfolios, suggesting that each measure reflects different aspects of investor sentiment.
{"title":"Is a sentiment-based trading strategy profitable?","authors":"Karam Kim, Doojin Ryu, Jinyoung Yu","doi":"10.1080/10293523.2022.2076373","DOIUrl":"https://doi.org/10.1080/10293523.2022.2076373","url":null,"abstract":"ABSTRACT We examine whether sentiment indices predict individual firms’ stock returns and evaluate the performances of sentiment-based trading strategies in the Korean equity market. We find that the sentiment indices (constructed using the principal component analysis (PCA) and overnight stock returns) positively predict stock price movements, whereas news sentiment does not significantly determine future stock returns. A comparison of portfolio performances among sentiment indices reveals that the long-short equity strategy based on PCA sentiment changes yields the highest return – a result that is not explained by well-known risk factors. Moreover, investors may earn even greater returns by employing multiple sentiment measures when constructing portfolios, suggesting that each measure reflects different aspects of investor sentiment.","PeriodicalId":44496,"journal":{"name":"Investment Analysts Journal","volume":"51 1","pages":"94 - 107"},"PeriodicalIF":0.9,"publicationDate":"2022-04-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49640437","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-04-03DOI: 10.1080/10293523.2022.2073049
S. Kim, Young-min Kim, Dennis W. Jansen, Yanxin Lu
ABSTRACT In this paper, we investigate how the old generation income structure affects aggregate equity purchases, using Flows of Funds Accounts and Survey of Consumer Finances. Our results suggest that the risk aversion that increases with age could be modified to incorporate the old’s pension ownership. In particular, private pension income to elder households are related to increased aggregate equity purchases, even considering other pension and all other income. In this sense, private pensions are a ‘stepping-stone’ to increased equity investment in US households.
{"title":"Does the elderly’s private pension ownership intensify aggregate equity demand? Empirical evidence in the US","authors":"S. Kim, Young-min Kim, Dennis W. Jansen, Yanxin Lu","doi":"10.1080/10293523.2022.2073049","DOIUrl":"https://doi.org/10.1080/10293523.2022.2073049","url":null,"abstract":"ABSTRACT In this paper, we investigate how the old generation income structure affects aggregate equity purchases, using Flows of Funds Accounts and Survey of Consumer Finances. Our results suggest that the risk aversion that increases with age could be modified to incorporate the old’s pension ownership. In particular, private pension income to elder households are related to increased aggregate equity purchases, even considering other pension and all other income. In this sense, private pensions are a ‘stepping-stone’ to increased equity investment in US households.","PeriodicalId":44496,"journal":{"name":"Investment Analysts Journal","volume":"51 1","pages":"83 - 93"},"PeriodicalIF":0.9,"publicationDate":"2022-04-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47768505","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-04-03DOI: 10.1080/10293523.2022.2087828
Adian McFarlane, A. Das, Y. Jung
ABSTRACT We use the nonlinear autoregressive distributed lag model to assess the asymmetric relationship between the Chicago Board Options Exchange’s volatility index (VIX) and volatility-of-volatility index (VVIX) over the period January 2007 to March 2020. To control for potentially confounding factors, we include measures for economic policy uncertainty and the volatility risk premium. There are three key findings. First, we find that there is an asymmetric long run cointegrating positive relationship running from VVIX to VIX. In this long run relationship, VIX is more responsive to deceases in VVIX than increases in VVIX. Second, we also find an asymmetric short run relationship between VIX and VVIX. However, in contrast to the long run results, for the short run VIX is more responsive to increases in VVIX than decreases in VVIX. Third, consistent with other studies, we find that in the long run VIX rises with greater economic policy uncertainty but falls with increases in the volatility risk premium. We discuss the implications of our findings for practitioners in risk and portfolio management, derivative pricing, and trading.
{"title":"The asymmetric relationship between volatility index and volatility-of-volatility index","authors":"Adian McFarlane, A. Das, Y. Jung","doi":"10.1080/10293523.2022.2087828","DOIUrl":"https://doi.org/10.1080/10293523.2022.2087828","url":null,"abstract":"ABSTRACT We use the nonlinear autoregressive distributed lag model to assess the asymmetric relationship between the Chicago Board Options Exchange’s volatility index (VIX) and volatility-of-volatility index (VVIX) over the period January 2007 to March 2020. To control for potentially confounding factors, we include measures for economic policy uncertainty and the volatility risk premium. There are three key findings. First, we find that there is an asymmetric long run cointegrating positive relationship running from VVIX to VIX. In this long run relationship, VIX is more responsive to deceases in VVIX than increases in VVIX. Second, we also find an asymmetric short run relationship between VIX and VVIX. However, in contrast to the long run results, for the short run VIX is more responsive to increases in VVIX than decreases in VVIX. Third, consistent with other studies, we find that in the long run VIX rises with greater economic policy uncertainty but falls with increases in the volatility risk premium. We discuss the implications of our findings for practitioners in risk and portfolio management, derivative pricing, and trading.","PeriodicalId":44496,"journal":{"name":"Investment Analysts Journal","volume":"51 1","pages":"127 - 142"},"PeriodicalIF":0.9,"publicationDate":"2022-04-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48185946","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-01-02DOI: 10.1080/10293523.2022.2034353
Qi Shi
ABSTRACT In a pioneering effort, we re-evaluate the performance of (C)CAPM (joint CAPM and consumption CAPM) in digesting a large number of anomalies. Our key contribution illustrates that the performance of (C)CAPM appears to be quite sensitive to the choice of weighting matrix. OLS cross-sectional regression reveals the poor performance of (C)CAPM. In contrast, the CAPM model actually explains a large portion of anomalies quite well when using an efficient weighting matrix (GLS), indicating that the prior expectation that the CAPM exhibits poor empirical performance should fundamentally be reversed.
{"title":"How does (C)CAPM digest anomalies?","authors":"Qi Shi","doi":"10.1080/10293523.2022.2034353","DOIUrl":"https://doi.org/10.1080/10293523.2022.2034353","url":null,"abstract":"ABSTRACT In a pioneering effort, we re-evaluate the performance of (C)CAPM (joint CAPM and consumption CAPM) in digesting a large number of anomalies. Our key contribution illustrates that the performance of (C)CAPM appears to be quite sensitive to the choice of weighting matrix. OLS cross-sectional regression reveals the poor performance of (C)CAPM. In contrast, the CAPM model actually explains a large portion of anomalies quite well when using an efficient weighting matrix (GLS), indicating that the prior expectation that the CAPM exhibits poor empirical performance should fundamentally be reversed.","PeriodicalId":44496,"journal":{"name":"Investment Analysts Journal","volume":"51 1","pages":"1 - 13"},"PeriodicalIF":0.9,"publicationDate":"2022-01-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45013781","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-01-02DOI: 10.1080/10293523.2022.2037202
Khoa Dang Duong, Linh Thi Diem Truong, Tran Ngoc Bao Huynh, Quang T. Luu
ABSTRACT We are the first ever to examine the financial constraints and distress risk puzzle of listed manufacturing firms in Vietnam. We employ different estimation methods such as portfolio sorting, Fama Macbeth regression, and asset pricing models to analyse a sample containing 27 300 firm-month observations from 2008 to 2021. Our empirical evidence figures out that the Z-score anomaly exists in the Vietnam stock market before the Covid-19 pandemic. The distress risk puzzle also exists after controlling for financial constraints and other firm characteristics. Moreover, the asset pricing model results conjecture that the distress risk is a priced factor. The average raw returns difference and risk-adjusted returns difference between stocks in the highest and lowest Z-score terciles are around 1% per month. However, we figure out that the Z-score puzzle disappears during the pandemic. Finally, our study employs a two-way sorting methodology to examine the causality between the distress puzzle and financial constraints. Our study figures out that distress risks cause higher financial constraints, not the other way around. Our findings support managers and policymakers in managing the default risk, especially during the pandemic.
{"title":"Financial constraints and the financial distress puzzle: Evidence from a frontier market before and during the Covid-19 pandemic","authors":"Khoa Dang Duong, Linh Thi Diem Truong, Tran Ngoc Bao Huynh, Quang T. Luu","doi":"10.1080/10293523.2022.2037202","DOIUrl":"https://doi.org/10.1080/10293523.2022.2037202","url":null,"abstract":"ABSTRACT We are the first ever to examine the financial constraints and distress risk puzzle of listed manufacturing firms in Vietnam. We employ different estimation methods such as portfolio sorting, Fama Macbeth regression, and asset pricing models to analyse a sample containing 27 300 firm-month observations from 2008 to 2021. Our empirical evidence figures out that the Z-score anomaly exists in the Vietnam stock market before the Covid-19 pandemic. The distress risk puzzle also exists after controlling for financial constraints and other firm characteristics. Moreover, the asset pricing model results conjecture that the distress risk is a priced factor. The average raw returns difference and risk-adjusted returns difference between stocks in the highest and lowest Z-score terciles are around 1% per month. However, we figure out that the Z-score puzzle disappears during the pandemic. Finally, our study employs a two-way sorting methodology to examine the causality between the distress puzzle and financial constraints. Our study figures out that distress risks cause higher financial constraints, not the other way around. Our findings support managers and policymakers in managing the default risk, especially during the pandemic.","PeriodicalId":44496,"journal":{"name":"Investment Analysts Journal","volume":"51 1","pages":"35 - 48"},"PeriodicalIF":0.9,"publicationDate":"2022-01-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44156455","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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