The Role of Safety and Leverage in S&P 500 Stock Returns: An Empirical Analysis, 2007-2015

Authors

Presenter(s)

Kevin Michael Wargo

Files

Description

In this study I use debt-to-equity as both a measure of safety and leverage. Low debt-to-equity stocks provide a measure of safety while high debt-to-equity stocks offer leverage. Using S&P 500 stocks ranked from low to high debt-to-equity I test the following hypotheses: (1) Low debt-to-equity portfolios outperform high debt-to-equity portfolios over long periods of time (i.e. persistence), (2) In periods of market growth, high debt-to-equity portfolios outperform low debt-to-equity portfolios, and (3) In market downturns, low debt-to-equity portfolios outperform high debt-to-equity portfolios.

Publication Date

4-5-2017

Project Designation

Independent Research - Undergraduate

Primary Advisor

Trevor C. Collier

Primary Advisor's Department

Economics and Finance

Keywords

Stander Symposium project

Recommended Citation

"The Role of Safety and Leverage in S&P 500 Stock Returns: An Empirical Analysis, 2007-2015" (2017). Stander Symposium Projects. 919.
https://ecommons.udayton.edu/stander_posters/919