Financial leverage and stock returns: evidence from an emerging economy

Nawazish Mirza, Birjees Rahat and Krishna Reddy

Economic Research-Ekonomska Istraživanja, 2016, vol. 29, issue 1, 85-100

Abstract: The aim of this research was to examine the propositions of Campbell et al. and Mirza et al. on pricing of leverage in stock returns using a comprehensive set of firms listed on the Karachi Stock Exchange (KSE) over a period of 13 years. Our results suggest that while size, value and, more importantly, financial leverage are systematic in nature, market risk premium is not a relevant factor. The results confirm the notion of leverage premium and have important implications for financial managers, investment analysts and other market participants who use asset pricing frameworks for investment appraisals. These findings have global relevance, notably for other emerging and developing economies where default risk is of importance due to cyclical nature of cash flows and low recovery rates owing to weaknesses of legal structure.

Date: 2016
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://hdl.handle.net/10.1080/1331677X.2016.1160792 (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:taf:reroxx:v:29:y:2016:i:1:p:85-100

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/rero20

DOI: 10.1080/1331677X.2016.1160792

Access Statistics for this article

Economic Research-Ekonomska Istraživanja is currently edited by Marinko Skare

More articles in Economic Research-Ekonomska Istraživanja from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().