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Procyclical leverage in Europe and its role in asset pricing

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Authors and Corporations: Baltzer, Markus (Author), Koehl, Alexandra (Author), Reitz, Stefan (Author)
Other Authors: Koehl, Alexandra [Author] • Reitz, Stefan 1964- [Author]
Type of Resource: E-Book
Language: English
published:
Frankfurt am Main Deutsche Bundesbank [2019]
Series: Deutsche Bundesbank: Discussion paper ; no 2019, 10
Source: Verbunddaten SWB
Lizenzfreie Online-Ressourcen
ISBN: 9783957295705
395729570X
Description
Summary: Broker-dealer leverage has recently proven to be strongly procyclical, exhibiting impressive explanatory power for a large cross-section of asset returns in the US. In this paper we add empirical evidence to this finding, showing that European and German broker-dealers actively manage their balance sheets. Moreover, by applying standard Fama-MacBeth regressions as well as dynamic asset pricing models (Adrian, Crump, and Moench, 2015), we confirm the importance of brokerdealer balance-sheet indicators for asset pricing. In particular, leverage shows a procyclical behavior with a positive price of risk. Moreover, high leverage coincides with high asset prices, thereby forecasting lower future returns.
Physical Description: 1 Online-Ressource (circa 34 Seiten); Illustrationen
ISBN: 9783957295705
395729570X