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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… Click to show full abstract
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
Journal Title: Global Finance Journal
Year Published: 2019
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