Debt/Equity Ratio and Expected Common Stock Returns: Empirical Evidence

Debt/Equity Ratio and Expected Common Stock Returns: Empirical Evidence ABSTRACT The expected common stock returns are positively related to the ratio of debt (non‐common equity liabilities) to equity, controlling for the beta and firm size and including as well as excluding January, though the relation is much larger in January. This relationship is not sensitive to variations in the market proxy, estimation technique, etc. The evidence suggests that the “premium” associated with the debt/equity ratio is not likely to be just some kind of “risk premium”. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Finance Wiley

Debt/Equity Ratio and Expected Common Stock Returns: Empirical Evidence

The Journal of Finance, Volume 43 (2) – Jun 1, 1988

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Publisher
Wiley
Copyright
1988 The American Finance Association
ISSN
0022-1082
eISSN
1540-6261
D.O.I.
10.1111/j.1540-6261.1988.tb03952.x
Publisher site
See Article on Publisher Site

Abstract

ABSTRACT The expected common stock returns are positively related to the ratio of debt (non‐common equity liabilities) to equity, controlling for the beta and firm size and including as well as excluding January, though the relation is much larger in January. This relationship is not sensitive to variations in the market proxy, estimation technique, etc. The evidence suggests that the “premium” associated with the debt/equity ratio is not likely to be just some kind of “risk premium”.

Journal

The Journal of FinanceWiley

Published: Jun 1, 1988

References

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