Kevin Aretz

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Position: Senior Lecturer in Finance
Academic unit: Accounting and Finance


Kevin Aretz holds an MSc degree in Finance from Maastricht University (mid 2004) and a PhD degree in Finance from Lancaster University (Dec 2008). Prior to joining Manchester Business School as a senior lecturer in September 2011, he worked as a lecturer in Finance at Lancaster University Management School. He also worked, on a part-time basis, as an academic advisor for Old Mutual Asset Management in London.

Research Interests

Kevin Aretz’s research interests are in the areas of theoretical and empirical asset pricing, econometrics, especially GMM and Markov switching, forecasting and corporate bankruptcy. His recent projects contribute to the literature in the following ways:
(1) At odds with intuition, many recent empirical studies find a negative relation between firms' default probabilities and their average equity returns. In one of my recent papers, I show that a plain-vanilla asset pricing model can produce a negative relation if default risk is high and driven by changing asset volatility. Simple cross-sectional tests confirm that the negative relation does indeed only arise in the situations predicted by the theoretical model.
In another paper (with Chris Florackis and Alex Kostakis), we analyze how default risk relates to average equity returns in other, non-US markets to obtain some out-of-sample evidence on the relation.
(2) There is so far no rational theory that jointly explains intermediate-term momentum and long-term reversals in stock returns. In one of my papers (with Peter Pope and Andy Stark), we show that modelling firm value as the sum of options to produce and options to invest and assuming that investment is irreversible has some potential to jointly explain the two phenomena.
(3) Other studies have shown that lagged idiosyncratic risk relates negatively to stock returns. In a paper with Eser Arisoy, we show that this is not due to market micro-structure biases associated with small, illiquid firms (as reasoned in many other paper), but that the effect can be explained using firms’ investment behaviour.

Programme involvement

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Publication summary




Working papers

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Showing 13 publication(s)


  • Aretz, K., Florackis, C., & Kostakis, A. (2016). Do Stock Returns Really Decrease with Default Risk? New International Evidence. Management Science. . Publication link: 6804a9a5-23a8-4f11-8fb8-1636908d82c3


  • Pryshchepa, O., Aretz, K., & Banerjee, S. (2013). Can Investors Restrict Managerial Behaviour in Distress Firms. Journal of Corporate Finance, 23(12), 222-239. . Publication link: 17701d69-c295-4679-aca8-2d87f0b4c7c3
  • Aretz, K., & Peel, D. (2013). An Example of an Optimal Forecast Exhibiting Decreasing Bias with Increasing Forecast Horizon. Bulletin of Economic Research, 65(4), 362-371. . Publication link: 9485b9c1-91e3-4f1e-bd36-be83845df8e9