The leverage anomaly in U.S. bank stock returns - Grantham Research Institute on climate change and the environment<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.lse.ac.uk\/granthaminstitute\/publication\/the-leverage-anomaly-in-u-s-bank-stock-returns\/\" \/>\n<meta property=\"og:locale\" content=\"en_GB\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The leverage anomaly in U.S. bank stock returns - Grantham Research Institute on climate change and the environment\" \/>\n<meta property=\"og:description\" content=\"This article examines the relationship between capital ratios and returns on US bank stocks between 1973 and 2019.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.lse.ac.uk\/granthaminstitute\/publication\/the-leverage-anomaly-in-u-s-bank-stock-returns\/\" \/>\n<meta property=\"og:site_name\" content=\"Grantham Research Institute on climate change and the environment\" \/>\n<meta property=\"article:modified_time\" content=\"2024-08-14T11:37:21+00:00\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Estimated reading time\" \/>\n\t<meta name=\"twitter:data1\" content=\"1 minute\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/www.lse.ac.uk\\\/granthaminstitute\\\/publication\\\/the-leverage-anomaly-in-u-s-bank-stock-returns\\\/\",\"url\":\"https:\\\/\\\/www.lse.ac.uk\\\/granthaminstitute\\\/publication\\\/the-leverage-anomaly-in-u-s-bank-stock-returns\\\/\",\"name\":\"The leverage anomaly in U.S. bank stock returns - 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{"id":57714,"date":"2021-11-01T09:57:00","date_gmt":"2021-11-01T09:57:00","guid":{"rendered":"https:\/\/www.lse.ac.uk\/granthaminstitute\/?post_type=publication&p=57714"},"modified":"2024-08-14T12:37:21","modified_gmt":"2024-08-14T11:37:21","slug":"the-leverage-anomaly-in-u-s-bank-stock-returns","status":"publish","type":"publication","link":"https:\/\/www.lse.ac.uk\/granthaminstitute\/publication\/the-leverage-anomaly-in-u-s-bank-stock-returns\/","title":{"rendered":"The leverage anomaly in U.S. bank stock returns"},"content":{"rendered":"\n

This article examines the relationship between capital ratios and returns on US bank stocks between 1973 and 2019. Banks with low capital ratios do not have higher, but rather lower returns than banks with intermediate levels of capital. This is not explained by standard risk factors. As a result, risk-adjusted returns (alphas) of low-capital banks are negative. Moreover, the stock returns exhibit a delayed reaction to changes in capital ratios. Low-capital banks that further increase their debt have high abnormal returns on the day of announcement, but tend to have low risk-adjusted returns in the 9 months that follow. The paper uncovers several explanations for this leverage anomaly: under-priced default risk, under-priced systematic risk and sensitivity to idiosyncratic volatility.<\/p>\n\n\n\n

Frank Venmans, The leverage anomaly in U.S. bank sto<\/em>ck returns, Journal of International Financial Markets, Institutions and Money, Volume 75, 2021, 101425, ISSN 1042-4431, https:\/\/doi.org\/10.1016\/j.intfin.2021.101425.<\/strong><\/p>\n\n","protected":false},"excerpt":{"rendered":"\n

This article examines the relationship between capital ratios and returns on US bank stocks between 1973 and 2019.<\/p>\n\n","protected":false},"author":12,"featured_media":0,"template":"","tags":[333,1972],"publication-type":[436],"topic_area":[4711],"class_list":["post-57714","publication","type-publication","status-publish","hentry","tag-banking","tag-financial-sector","publication-type-research-articles","topic_area-banking-and-private-investors"],"acf":{"exclude_from_sync":{"ref_value":"field_560538b0e7350","value":"0","type":false,"post_type":""},"downloads":{"ref_value":"field_52f16cc1a80f2","value":false,"type":"repeater","post_type":""},"rss_newsletter":{"ref_value":"field_54f5c2c1544d8","value":"","type":false,"post_type":""},"profile_link":{"ref_value":"field_52f164b5189e9","value":["frank-venmans"],"type":"relationship","post_type":"profile"},"article_link":{"ref_value":"field_52eee3c7f0586","value":"https:\/\/www.sciencedirect.com\/science\/article\/abs\/pii\/S1042443121001384","type":false,"post_type":""},"article_link_title":{"ref_value":"field_5322399d89d42","value":"External link to paper","type":false,"post_type":""},"spotlight":{"ref_value":"field_52f80896506d3","value":"","type":false,"post_type":""}},"yoast_head":"\nThe leverage anomaly in U.S. bank stock returns - 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