PT  - JOURNAL ARTICLE
AU  - Aydin Akgun
AU  - Rajna Gibson
TI  - Recovery Risk in Stock Returns
AID  - 10.3905/jpm.2001.319789
DP  - 2001 Jan 31
TA  - The Journal of Portfolio Management
PG  - 22--31
VI  - 27
IP  - 2
4099  - https://pm-research.com/content/27/2/22.short
4100  - https://pm-research.com/content/27/2/22.full
AB  - The authors provide evidence that the power of book–to–market and size attributes in explaining the cross–section of stock returns may, in part, lie in the fact that these concepts subsume useful information regarding both the probability of bankruptcy and recovery rates. Other research that focuses primarily on the probability of default concludes that investors do not care about financial distress risk. The authors argue, however, that this conclusion may be premature, as the evidence suggests that investors are concerned, ex ante, about recovery rate risk as well. The findings here have important portfolio management implications.