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Chapter 11 Stocks: Information Uncertainty

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  • Xavier Brédart
  • Nadine Levratto
  • Messaoud Zouikri

Abstract

The aim of this paper is to apprehend the information uncertainty inherent to stocks of U.S. firms around their filing for reorganization procedure. To this end, a Generalized Auto-Regressive Conditional Heteroscedasticity (GARCH) model is proposed to analyze information uncertainty (volatility is used as a proxy) around the filing announcement for reorganization procedure (chapter 11) of 435 U.S. firms during the period 2000-2012. Our results show that the volatility of stock returns generally increases on and after the announcement date for bankruptcy procedure but also that shocks may be observed at different periods. This study may be of interest for investors considering distressed stocks as a potential element of diversification.

Suggested Citation

  • Xavier Brédart & Nadine Levratto & Messaoud Zouikri, 2016. "Chapter 11 Stocks: Information Uncertainty," Accounting and Finance Research, Sciedu Press, vol. 5(1), pages 130-130, February.
    • Handle: RePEc:jfr:afr111:v:5:y:2016:i:1:p:130
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    References listed on IDEAS

    as
    1. Aharony, Joseph & Jones, Charles P & Swary, Itzhak, 1980. "An Analysis of Risk and Return Characteristics of Corporate Bankruptcy Using Capital Market Data," Journal of Finance, American Finance Association, vol. 35(4), pages 1001-1016, September.
    2. Richard T. Baillie & Huimin Chung, 2001. "Estimation of GARCH Models from the Autocorrelations of the Squares of a Process," Journal of Time Series Analysis, Wiley Blackwell, vol. 22(6), pages 631-650, November.
    3. Dawkins, Mark C. & Bhattacharya, Nilabhra & Bamber, Linda Smith, 2007. "Systematic Share Price Fluctuations after Bankruptcy Filings and the Investors Who Drive Them," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 42(2), pages 399-419, June.
    4. Chi, Li-Chiu & Tang, Tseng-Chung, 2007. "Impact of reorganization announcements on distressed-stock returns," Economic Modelling, Elsevier, vol. 24(5), pages 749-767, September.
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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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