Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/194595
Authors: 
Baltzer, Markus
Koehl, Alexandra
Reitz, Stefan
Year of Publication: 
2019
Series/Report no.: 
Bundesbank Discussion Paper 10/2019
Abstract: 
Broker-dealer leverage has recently proven to be strongly procyclical, exhibiting impressive explanatory power for a large cross-section of asset returns in the US. In this paper we add empirical evidence to this finding, showing that European and German broker-dealers actively manage their balance sheets. Moreover, by applying standard Fama-MacBeth regressions as well as dynamic asset pricing models (Adrian, Crump, and Moench, 2015), we confirm the importance of brokerdealer balance-sheet indicators for asset pricing. In particular, leverage shows a procyclical behavior with a positive price of risk. Moreover, high leverage coincides with high asset prices, thereby forecasting lower future returns.
Subjects: 
broker-dealer leverage
intermediary asset pricing
dynamic asset pricing
JEL: 
E31
G21
ISBN: 
978-3-95729-570-5
Document Type: 
Working Paper
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