Kevin Michael Wargo
Download Project (267 KB)
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.
Independent Research - Undergraduate
Trevor C. Collier
Primary Advisor's Department
Economics and Finance
Stander Symposium project
"The Role of Safety and Leverage in S&P 500 Stock Returns: An Empirical Analysis, 2007-2015" (2017). Stander Symposium Projects. 919.