"This paper brings together the evidence on two asset pricing anomalies-continuation of prior returns (momentum) and the market mispricing of distressed firms-using UK data. Our analysis demonstrates both these effects are driven by market underreaction to financial distress risk. In particular,...

This paper brings together the evidence on two asset pricing anomalies - continuation of prior returns (momentum) and the market pricing of distressed firms. Our empirical analysis demonstrates both these effects are driven by market underreaction to bad news, and that momentum is largely...

Recently developed corporate bankruptcy prediction models adopt a contingent-claims valuation approach. However, despite their theoretical appeal, tests of their performance compared with traditional simple accounting-ratio-based approaches are limited in the literature. We find the two...