Kaylene Zaretzky

Relation between distress risk, book-to-market ratio and return premium

Purpose - Earlier research found that firms with the highest distress risk have low book-to-market (B/M) ratios and low returns. This paper aims to examine the robustness of thoses results and provide further evidence that high distress-risk firms do not enjoy the same high returns earned by high B/M firms and that distress risk is unlikely to explain the Fama and French high-minus-low (HML) B/M factor. Design/methodology/approach - A distress-risk measure, distressed-minus-solvent (DMS), is calculated and a range of zero investment distress-risk trading strategies is investigated. Value- and equal-weighted portfolios are examined both with negative book-equity firms and without. These most distressed firms have low or negative B/M values and would either not be included in the Fama and French sample or included in the low B/M portfolio. Findings - The paper finds that the DMS factor is negative and significant, and none of the zero investment strategies earns significantly positive returns. Research limitations/implications - The findings suggest that exposure to distress risk does not earns investors a positive risk premium. It appears that over the period examined, market inefficiencies drive the market value and returns of high distress-risk firms. Originality/value - The distress-risk premium is shown to be negative and, therefore, cannot be driven by bankruptcy risk alone. The negative premium is not consistent with a financial distress explanation for the Fama and French HML factor.

Inquiry into social impact investment for housing and homelessness outcomes

This research investigated Social impact investment (SII), which aims to generate and actively measure social and financial returns. There are several promising SII models—including housing supply bonds, property funds, funding social enterprises, social impact bonds and social impact loans. Effective SII requires suppliers of goods and services, intermediaries, suppliers of capital, government and beneficiaries to work together.

What drives the high health care costs of the homeless

Abstract Existing research demonstrates that mean health care costs incurred by those experiencing homelessness are high. However, high mean health care costs mask the fact that a sizeable number of people experiencing homelessness incur low costs and that very high costs are driven by a minority of the homeless population. This paper examines health care costs estimated from two Australian surveys of those experiencing homelessness undertaken by the authors. It demonstrates three important findings. First, higher health care costs are most strongly associated with diagnosed mental health disorders, followed by long-term physical health conditions. Second, having a current drug or alcohol dependency, but no diagnosed mental health disorder or long-term physical health issue, is not associated with higher level health care costs. Finally, higher health care costs are incurred by those with long periods of rough sleeping. The findings of this research provide a significant economic argument for government intervention to break the cycle of homelessness as they reveal significant potential savings to effective interventions for homeless people with diagnosed mental health disorders and long-term rough sleeping.