Leveraged stock portfolios over long holding periods: A continuous-time model

Dale Domian (), Marie Racine () and Craig Wilson ()

Journal of Economics and Finance, 2006, vol. 30, issue 3, 356-375

Abstract: We use a continuous-time model to derive return and wealth distributions for leveraged portfolios over long holding periods. These theoretical distributions closely match empirical distributions obtained from a resampling procedure. The expected annualized return is a concave function of the degree of leverage. With historical parameter values, the function is maximized at 203% stock, borrowing an amount equal to 103% of net wealth. This maximal stock proportion is considerably reduced if the borrowing rate is higher than the historical lending rate. Copyright Academy of Economics and Finance 2006

Date: 2006
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1007/BF02752741 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:jecfin:v:30:y:2006:i:3:p:356-375

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/12197/PS2

DOI: 10.1007/BF02752741

Access Statistics for this article

Journal of Economics and Finance is currently edited by James Payne

More articles in Journal of Economics and Finance from Springer, Academy of Economics and Finance Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().