{"title":"Leveraged Speculators and Asset Prices","authors":"Wenxi Jiang","doi":"10.1093/rof/rfad037","DOIUrl":null,"url":null,"abstract":"Abstract I test the hypothesis that the use of leverage by market speculators can increase the likelihood and magnitude of crashes in asset prices. Using a direct leverage measure derived from U.S. public filings, I find that (1) stocks held by highly leveraged hedge funds subsequently have more negatively skewed returns than stocks held by less leveraged funds, and (2) upon extremely negative earnings surprises or funding liquidity shocks, stocks owned by high-leverage funds exhibit abnormal price declines and subsequent reversal. Consistent with the fire-sale and contagion hypothesis, high-leverage funds tend to reduce the position following negative news about a stock, and such selling can extend to other stocks in the portfolio, increasing the crash-proneness of the stocks they hold.","PeriodicalId":48036,"journal":{"name":"Review of Finance","volume":null,"pages":null},"PeriodicalIF":5.6000,"publicationDate":"2023-10-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Review of Finance","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.1093/rof/rfad037","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
Abstract I test the hypothesis that the use of leverage by market speculators can increase the likelihood and magnitude of crashes in asset prices. Using a direct leverage measure derived from U.S. public filings, I find that (1) stocks held by highly leveraged hedge funds subsequently have more negatively skewed returns than stocks held by less leveraged funds, and (2) upon extremely negative earnings surprises or funding liquidity shocks, stocks owned by high-leverage funds exhibit abnormal price declines and subsequent reversal. Consistent with the fire-sale and contagion hypothesis, high-leverage funds tend to reduce the position following negative news about a stock, and such selling can extend to other stocks in the portfolio, increasing the crash-proneness of the stocks they hold.
期刊介绍：
The Review of Finance, the official journal of the European Finance Association, aims at a wide circulation and visibility in the finance profession. The journal publishes high-quality papers in all areas of financial economics, both established and newly developing fields: • •Asset pricing •Corporate finance •Banking and market microstructure •Law and finance •Behavioral finance •Experimental finance Review of Finance occasionally publishes special issues on timely topics, including selected papers presented at the meetings of the European Finance Association or at other selected conferences in the field.
京公网安备 11010802042870号
京ICP备2023020795号-1
分享
求助内容：
应助结果提醒方式：
扫码关注我们
