Discussion of “Value investing in credit markets”

Discussion of “Value investing in credit markets” Rev Account Stud (2012) 17:610–611 DOI 10.1007/s11142-012-9198-3 Itzhak Venezia Published online: 12 July 2012 Springer Science+Business Media, LLC 2012 This discussion starts by describing what I like about the paper, then it expounds on the ‘‘big picture’’ lessons I have drawn from it, and concludes with thoughts about where this research may lead us. This paper spans many areas—options theory, bankruptcy predictions, efficient markets, and investment theory—and sheds light on all of them. The paper integrates accounting variables and options theory to arrive at superior bankruptcies predictions, and then uses these predictions to test the efficiency of credit markets. The paper makes several important contributions. It provides new methods for bankruptcy predictions, it demonstrates the usefulness of credit spreads in these predictions, it explores the efficiency of credit markets, and it confirms the usefulness of accounting information in investments in credit markets. The paper’s main point is that credit markets are inefficient and that apparently investors fail to take full advantage of the information inherent in credit spreads. The authors present several estimates of credit spreads that can predict future credit spreads, thus opening the potential for above normal profits. While not all the estimates of credit spreads the http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Accounting Studies Springer Journals

Discussion of “Value investing in credit markets”

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Springer US
Copyright © 2012 by Springer Science+Business Media, LLC
Business and Management; Accounting/Auditing; Corporate Finance; Public Finance
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