In this article, we demonstrate that a direct relation exists between the context of Japanese firms indicating relative distress and conditional return distribution properties. We map cross-sectional vectors with company characteristics on vectors with return feature vectors, using a fuzzy identification technique called Competitive Exception Learning Algorithm (CELA)1. In this study we use company characteristics that follow from capital structure theory and we relate the recognized conditional return properties to this theory. Using the rules identified by this mapping procedure this approach enables us to make conditional predictions regarding the probability of a stock's or a group of stocks' return series for different return distribution classes (actually return indices). Using these findings, one may construct conditional indices that may serve as benchmarks. These would be particularly useful for tracking and portfolio management.

asset pricing, capital structure, conditional return distribution, fuzzy systems, heuristic learning
Asset Pricing (jel G12), Corporate Finance and Governance (jel G3), Business Administration and Business Economics; Marketing; Accounting (jel M)
Erasmus Research Institute of Management
ERIM Report Series Research in Management
Copyright 2002, W.M. Van den Bergh, O. Steenbeek, J. Van den Berg, This report in the ERIM Report Series Research in Management is intended as a means to communicate the results of recent research to academic colleagues and other interested parties. All reports are considered as preliminary and subject to possibly major revisions. This applies equally to opinions expressed, theories developed, and data used. Therefore, comments and suggestions are welcome and should be directed to the authors.
Erasmus Research Institute of Management

van den Bergh, W.-M, Steenbeek, O.W, & van den Berg, J.H. (2002). Relative Distress and Return Distribution Characteristics of Japanese Stocks, a Fuzzy-Probabilistic Approach (No. ERS-2002-29-F&A). ERIM Report Series Research in Management. Erasmus Research Institute of Management. Retrieved from