Signal on the Margin: Behavior of Levered Investors and Future Economic Conditions

Deuskar, P and Kumar, N and Poland, J (2020) Signal on the Margin: Behavior of Levered Investors and Future Economic Conditions. Review of Finance.

Full text not available from this repository. (Request a copy)

Abstract

Margin capacity, defined as the aggregate excess debt capacity of investors buying securities on margin, strongly predicts (a) lower S &P 500 returns, (b) lower growth in aggregate earnings, dividends, employment, and overall economic activity, (c) higher macro, financial, and policy uncertainty, (d) lower interest rates, (e) tighter lending standards by banks, and (f) lower intermediary equity capital. High margin capacity is a precursor, not a response, to borrowing and intermediary constraints and higher volatility. It typically arises when levered investors with profitable past positions limit their leverage. We interpret that it reflects informed investor’ conservatism ahead of bad times.

Affiliation: Indian School of Business
ISB Creators:
ISB CreatorsORCiD
Deuskar, PUNSPECIFIED
Kumar, NUNSPECIFIED
Poland, JUNSPECIFIED
Item Type: Article
Uncontrolled Keywords: Economic Conditions, Finance Policy
Subjects: Economics
Finance
Finance > Microfinance
Policy
Depositing User: Gurusrinivasan K
Date Deposited: 02 Mar 2020 15:22
Last Modified: 02 Mar 2020 15:42
URI: http://eprints.exchange.isb.edu/id/eprint/1350
Publisher URL: https://doi.org/10.1093/rof/rfaa006
Publisher OA policy: http://sherpa.ac.uk/romeo/issn/1572-3097/
Related URLs:

Actions (login required)

View Item View Item
Statistics for DESI ePrint 1350 Statistics for this ePrint Item