Embedded Leverage
نویسندگان
چکیده
Abstract Many financial instruments are designed with embedded leverage, such as options and leveraged exchange-traded funds (ETFs). Embedded leverage alleviates investors’ constraints, and, therefore, we hypothesize that lowers required returns. Consistent this hypothesis, find empirically ETFs provide significant amounts of leverage; increases return volatility in proportion to the higher is associated lower risk-adjusted The results statistically economically significant, extensive robustness tests discuss broader implications for economics. (JEL G02, G11, G12, G13, G14, G20)
منابع مشابه
Sticky Leverage
This paper considers the macroeconomic effects of allowing for nominal debt contracts in the context of a quantitative business cycle model with financial market frictions. In our setting, as in reality, corporations fund themselves by choosing the appropriate mix of nominal defaultable debt and equity securities to issue in every period. Corporate debt is priced fairly taking into account defa...
متن کاملEstimation of Leverage Effect
The leverage effect has become an extensively studied phenomenon that describes the (usually) negative correlation between stock returns and volatility. All the previous studies have focused on the origin and properties of the leverage effect. Even though most studies of the leverage effect are based on cross-sectional calibration with parametric models, few of them have carefully studied its e...
متن کاملSpeculation and Leverage
Speculative episodes typically involve leverage. For example, the well known tulipmania episode was accompanied by the introduction of foward contracts which allowed speculators to take leveraged positions in tulip bulbs. More recently, the Great Crash of 1929 was exacerbated by leveraged trusts which used leverage to buy stocks. These leveraged trusts could in turn be bought on margin which al...
متن کاملCapturing Heterogeneity in Leverage∗
Large heterogeneity has prevented current capital structure research from explaining variations in firms’ capital structures to a satisfactory degree. We find that firms generally fall into two categories based on their capital structure policies. One category consists of larger firms that tend to pay dividends, and includes almost all zero-leverage firms in the sample. These firms tend to resp...
متن کاملSensitivity of Leverage Scores
The sampling strategies in many randomized matrix algorithms are, either explicitly or implicitly, controlled by statistical quantities called leverage scores. We present four bounds for the sensitivity of leverage scores as well as an upper bound for the principal angles between two matrices. These bounds are expressed by considering two real m×n matrices of full column rank, A and B. Our boun...
متن کاملذخیره در منابع من
با ذخیره ی این منبع در منابع من، دسترسی به آن را برای استفاده های بعدی آسان تر کنید
ژورنال
عنوان ژورنال: The Review of Asset Pricing Studies
سال: 2021
ISSN: ['2045-9939', '2045-9920']
DOI: https://doi.org/10.1093/rapstu/raab022