Survival and Pricing Puzzles
Ricerca locale ex 60% (LINEA A)
17/07/2019 - 16/07/2021
Partecipanti al progetto
- Nicodano Giovanna (Responsabile)
- Sembenelli Alessandro (Componente)
Descrizione del progettoThis paper studies how survival affects stock prices. We show that the average stock price of surviving firms exceeds the average value of surviving plus defaulted firms. This price-value wedge generates puzzles involving firm types with different mortality, since the wedge is narrower for types with higher survival. Thus, self-selection leads to a discount for types with lower bankruptcy probability. This research will investigate whether this insight explains the cross sectional diversification discount. It may also investigate whether it explains additional pricing puzzles.