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Prof.Yang Xuewei's Lecture Notice

Publish Date: 2021/05/18 16:10:22    Hits:

Title:Leverage is a double-edged sword

Time:2021.5.20 19:30-21:00

Presenter:Prof. Yang Xuewei


We use proprietary futures brokerage data to study the impact of leverage on investors’ trading performance. We find that leverage is a double-edged sword.
For the bulk of investors, even though high leverage increases the risk (volatility) of their portfolio, it actually decreases performance. Specifically, a one unit increase in leverage reduces investment returns by 5.3 bps per day (13% annualized). Leveraged losses occur due to forced liquidation (margin calls) as well as additional trading costs due to enlarged leverage-induced positions. On the other hand, a few skilled investors do take advantage of leverage by actively timing the market and conducting arbitrage trades; these traders on average earn a 19.3 bps daily (47% annualized) return per additional unit of leverage.

Tencent Meeting:

ID:326 660 154

Pass Code:210520