The Impact of Financial Leverage on the Pricing Risk in the Egyptian Stock Market

Mustafa Hussein Abd-Allah and Wael Ibrahim Abdelrahim Hamimy
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Mustafa Hussein Abd-Allah: Sadat Academy for Management Sciences, Cairo, Egypt
Wael Ibrahim Abdelrahim Hamimy: Sadat Academy for Management Sciences, Cairo, Egypt

Journal of Financial Studies, 2024, vol. 16, issue 9, 11-22

Abstract: This paper examines the impact of financial leverage on the risk pricing in the Egyptian Stock Exchange (EGX) by adding an additional risk factor reflecting financial leverage to the three factor model of Fama and French. We used monthly excess stock returns of 50 stocks listed on the (EGX) from January 2014 to December 2018 to test Fama and French model before and after adding the financial leverage factor. Total debt to equity ratio was used to calculate the financial leverage. The results do not support Fama and French model before and after adding the financial leverage factor, therefore there is no effect of financial leverage on the risk pricing.

Keywords: Fama and French three-factor model; Financial leverage. (search for similar items in EconPapers)
JEL-codes: G12 G32 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:fst:rfsisf:v:16:y:2024:i:9:p:11-22

DOI: 10.55654/JFS.2024.9.16.01

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