PT  - JOURNAL ARTICLE
AU  - George Batta
AU  - Wan Wongsunwai
TI  - The Impact of Equity Misvaluation on Predictive<br/>Accuracy of Bankruptcy Models
AID  - 10.3905/jfi.2014.24.2.005
DP  - 2014 Sep 30
TA  - The Journal of Fixed Income
PG  - 5--18
VI  - 24
IP  - 2
4099  - https://pm-research.com/content/24/2/5.short
4100  - https://pm-research.com/content/24/2/5.full
AB  - This article examines the impact of equity misvaluation on the predictive accuracy of bankruptcy models. The authors find that structural bankruptcy prediction models are not affected by misvaluation. For hazard models, however, forecasting accuracy for properly valued firms is greater than for misvalued firms, and model forecasting accuracy improves significantly if model coefficients vary with misvaluation. The results show the importance of taking stock market misvaluation into account when forecasting bankruptcies using hazard models.TOPICS: Security analysis and valuation, risk management, quantitative methods