Leverage Is a Double-Edged Sword

• 成果类型: Article
• 署名作者: Subrahmanyam, Avanidhar; Tang, Ke; Wang, Jingyuan; Yang, Xuewei
• 署名单位: University of California System; University of California Los Angeles; Tsinghua University; Tsinghua University; Beihang University; Beihang University; Nanjing University; Nanjing University
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.13316
• 发表日期: 2024
• 页码: 1579-1634
• 关键词: cross-section; performance; liquidity; overconfidence; volatility; stocks

摘要

We use proprietary data on intraday transactions at a futures brokerage to analyze how implied leverage influences trading performance. Across all investors, leverage is negatively related to performance, due partly to increased trading costs and partly to forced liquidations resulting from margin calls. Defining skill out-of-sample, we find that relative performance differentials across unskilled and skilled investors persist. Unskilled investors' leverage amplifies losses from lottery preferences and the disposition effect. Leverage stimulates liquidity provision by skilled investors, and enhances returns. Although regulatory increases in required margins decrease skilled investors' returns, they enhance overall returns, and attenuate return volatility.