Deleveraging risk

Richardson, S A and Saffi, P A C and Sigurdsson, K (2016) Deleveraging risk. Journal of Financial and Quantitative Analysis (JFQA). ISSN 0022-1090 (Submitted)

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Abstract

Deleveraging risk is the risk attributable to investing in a security held by levered investors. When there is an aggregate negative shock to the availability of funding capital, securities with a greater presence of levered investors experience extreme return realizations as these investors unwind their positions. Using data on equity loans as a proxy for the degree of levered positions in a given stock, we find robust evidence of deleveraging risk. Stocks with a high degree of short selling experience large positive returns and a decrease in short selling around periods of funding capital scarcity.

Item Type: Article
Additional Information: © 2016 Michael G. Foster School of Business, University of Washington
Subjects: E > Equity capital
F > Financial risk
Subject Areas: Economics
Date Deposited: 01 Nov 2016 17:58
Last Modified: 01 Sep 2017 13:12
URI: http://lbsresearch.london.edu/id/eprint/566

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