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The Paradox Is Everywhere

High Returns from Low Risk, 2017, p.123-128

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Title:
The Paradox Is Everywhere
Author: van Vliet, Pim ; de Koning, Jan
Subjects: equity investor ; financial leverage ; global equity market ; international stock markets ; investment paradox ; market risk
Is Part Of: High Returns from Low Risk, 2017, p.123-128
Description: A highly financial leveraged company relies more on debt than equity to finance its operations and therefore exposes the equity investor to more risk. Stocks with higher financial leverage also have below‐average returns. In general, stocks that have a higher probability of running into a financially distressful situation, measured in various dimensions, also have lower returns. These findings add to the robustness of the results as the 'inconvenient truth' does not critically depend on the exact definition of risk. Looking at the robust, long‐term evidence for US stocks, one could conclude that higher risk does not result in higher returns when investing in US stocks. As most academic research studies focus on US data, while the majority of the global equity market is outside the US, it begs the question whether the paradox also prevails on international stock markets.
Publisher: Chichester, UK: John Wiley & Sons, Ltd
Language: English
Identifier: ISBN: 1119351057
ISBN: 9781119351054
EISBN: 9781119357186
EISBN: 1119357187
DOI: 10.1002/9781119357186.ch16
Source: Ebook Central Academic Complete

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