Defense Date

Spring 3-29-2017

Availability

Worldwide Access

Submission Type

thesis

Degree Name

MS

Department

Computational Mathematics

School

McAnulty College and Graduate School of Liberal Arts

Committee Chair

Abhay Gaur

Committee Member

John Kern

Committee Member

Frank D'Amico

Committee Member

Sean Tierney

Keywords

Bankruptcy, catastrophic, cusp, logistic, Portfolio, regression

Abstract

This paper uses logistic regression to assign risk of catastrophic loss (defined as a loss of 80% or more of market cap value) to companies, and analyzes the subsequent returns of high risk and low risk portfolios. In the final model, the low risk portfolio had a three-year mean return of approximately 47%, with a catastrophic loss rate of 1.1%. The high-risk portfolio had a three-year mean return of approximately .5%, with a catastrophic loss rate of 29%. The paper expands upon a model developed by Dr. Abhay Gaur and Dr. Leo Rebholz in Rebholz’s 2002 thesis, Bankruptcy as Cusp Catastrophe. This paper first validates the model, introduces a new variable, which examines financial momentum, and transforms the bankruptcy variable to catastrophic loss. The success of the model was viewed through a comparative approach of high and low risk portfolios.

Format

PDF

Language

English

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