Relative Leverage And The Alpha Strategy In Stock Investment

Stock investment is currently the most popular means of investment,but how to identify revenue is still a big problem,and leverage is one of the factors which affect yield,but according to the existing empirical evidence,lever and the correlation between stock returns is not clear.Although a number of studies,directly or indirectly,analyzes the financial leverage and the correlation of stock returns,but the plus or minus characteristic between them and the related degree has not been solved.Some studies show that there is a positive correlation between financial leverage and earnings.However,other studies have shown that after controlling the market value of enterprises and calculating the earnings by market value,the earnings are still not sensitive and are less affected by leverage.So decided to throw financial leverage,this paper introduced the relative leverage,through the analysis of the dynamic nature of the company's target capital structure,from the perspective of the relative leverage to study its influence on stock returns,analysis of individual stocks first,and then combined with alpha strategy,portfolio analysis,observe its all a-share listed companies in China stock in 1999-2016,the impact of income,to re-examine the argument.Specifically,consistent with previous capital structure dynamic model,this paper argues that in order to adjust the cost and a temporary deviation from the optimal capital structure is reasonable,to estimate the target of every enterprise leverage,and relative leverage is defined as the difference between the actual lever and target leverage value,then relative leverage through regression analysis,the relationship between the expected return of stock,we found a significant correlation between them is positive,and is has a significant effect on market value and book value ratio,in addition,unlike the us,the empirical results of this article said the relative leverage effect on stock returns does not have symmetry.After analyzing the influence of relative leverage on average stock return rate,this paper compares the influence of actual leverage and relative leverage on return rate,and obtains the result that relative leverage has greater influence.Since then,combining with the alpha strategy,analyzed the influence of the relative leverage on portfolio,a-share stock according to relative leverage size can be divided into 10 groups and use the Fama-French three factor model and four factor model of regression analysis,found that the two models of factors and cannot fully explain the positive correlation with yield of stocks,and by quite A high and low is A build alpha is significant difference of the HL,can come to the conclusion that the relative leverage effect on earnings is very significant,and can be applied to the alpha stock investment strategy,generating benefits of alpha.