Deleveraging risk
Accepted version
Peer-reviewed
Repository URI
Repository DOI
Change log
Authors
Richardson, S
Chauffaille Saffi, P
Sigurdsson, K
Abstract
Deleveraging risk is the risk attributable to investing in a security held by levered investors. When there is an aggregate negative shock to the availability of funding capital, securities with a greater presence of levered investors experience extreme return realizations as these investors unwind their positions. Using data on equity loans as a proxy for the degree of levered positions in a given stock, we find robust evidence of deleveraging risk. Stocks with a high degree of short selling experience large positive returns and a decrease in short selling around periods of funding capital scarcity.
Description
Keywords
deleveraging, equity lending, short selling, arbitrage capital
Journal Title
Journal of Financial and Quantitative Analysis
Conference Name
Journal ISSN
0022-1090
1756-6916
1756-6916
Volume Title
52
Publisher
Cambridge University Press