At any point in time, most firms are not in financial distress. This implies that they must suffer value losses unrelated to their leverage before becoming financially distressed. We first show that if estimates of ex-ante distress costs are not filtered of such non-debt related value declines,...

This paper studies the characteristics of firm level equity volatility. There is a lack of consensus in the finance literature as to the relative statistical and economic significance of the leverage and feedback effects on equity volatility. We provide a dynamic framework to investigate...