O-score financial distress risk asset pricing

Syou Ching Lai, Hung-chih Li, James A. Conover, Frederick Wu

Research output: Contribution to journalArticle

2 Citations (Scopus)

Abstract

We examine explicitly priced financial distress risk in post-1990 equity markets. We add a financial distress risk factor to Fama and French's (1993) three-factor model, based on Griffin and Lemmon's (2002) findings that financial distress is not fully captured by the book-to-market factor. We test three-factor and four-factor capital asset pricing models using both annual buy-and-hold analysis and monthly time series analysis across portfolios adjusted for common book-to-market, size, and financial distress factors. We find empirical support for an Ohlson (1980) O-score-based financial distress risk four-factor asset pricing model in the U.S. and Japanese markets.

Original languageEnglish
Pages (from-to)51-94
Number of pages44
JournalResearch in Finance
Volume26
Publication statusPublished - 2010 Dec 1

All Science Journal Classification (ASJC) codes

  • Finance

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    Lai, S. C., Li, H., Conover, J. A., & Wu, F. (2010). O-score financial distress risk asset pricing. Research in Finance, 26, 51-94.