Authors

Presenter(s)

Kevin Michael Wargo

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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 poster

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

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