Levered Returns / Ivo Welch.

Format:

Book

Author/Creator:

Welch, Ivo.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w22150.

NBER working paper series no. w22150

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2016.

Summary:

Do financial markets properly reflect leverage? Unlike Gomes and Schmid (2010) who examine this question with a structural approach (using long-term monthly stock characteristics), my paper examines it with a quasi-experimental approach (using short-term a discrete event). After a firm has declared a dividend (i.e., after the news release), but in the few days that precede the payment date, an investor in the traded equity owns a claim to the dividend cash plus the remaining firm equity within the corporate shell. After the payment date, the shell contains only the dividend-sans-cash firm equity. The empirical evidence confirms rational increases in volatilities but shows unexpected decreases in average returns. The best explanation is behavioral.

Notes:

Print version record

April 2016.