Credit risk in equity return
Date Issued
2006
Date
2006
Author(s)
Peng, I-Ting
DOI
zh-TW
Abstract
The purpose of this study is to examine the relationship between credit risk and the subsequent stock returns. I use TEJ's TCRI as a proxy variable to the credit risk. In the security returns tests, the effects on market value and market-to-book ratio were controlled. Finally, a contrarian strategy was built by adding credit risk variable.
The t-test was applied to examine the relationship between stock return and its credit risk. Furthermore comprehensive scores without artificial adjustments were added to replace TCRI for the t-tests. In analyzing investment tactics, the t-test was applied on financial statement announcement date, and applied regression self-assessed income. The results show:
1.In contrast with the popularity of growth and large-cap stocks among individual securities, medium stocks with medium market-to-book ratio, small stocks with lower market-to book-ratio, and medium stocks with lower market-to-book ratios have higher returns.
2.The contrarian strategy is suitable for the stock market in Taiwan. We also find significantly greater returns associated with applying the contrarian strategy in January than that in April.
Subjects
信用風險
權益報酬
反向投資策略
Credit risk
Stock return
Contrarian strategy
Type
other
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