The impacts of leverage, price book ratio, dividend yield and past performance on stock returns
by Tristan Nguyen; Alexander Schuessler
International Journal of Accounting and Finance (IJAF), Vol. 4, No. 4, 2014

Abstract: Considering mixed results of several studies that analyse the influence of total leverage on stock returns, we focus on a more differentiated ratio in our approach: 'total debt to (total capital + long term debt)' [TD/(TC + LTD)] which treats short- and long-term debt differently. In this article, we employ an investment strategy on the German stock market that is based on TD/(TC + LTD) as well as price to book, dividend yield and past stock performance. Interestingly, the relation between TD/(TC + LTD) and stock returns is negative and highly significant. That is essential because it contradicts one of the basic principles in traditional financial theory. Price book is negatively and dividend yield is positively related to returns. Looking at past performance, we find a significant short-term momentum and long-term contrarian pattern. On balance, those variables impact returns critically. Furthermore, we analyse the question whether differences in returns are a compensation for risk taking.

Online publication date: Fri, 12-Dec-2014

The full text of this article is only available to individual subscribers or to users at subscribing institutions.

 
Existing subscribers:
Go to Inderscience Online Journals to access the Full Text of this article.

Pay per view:
If you are not a subscriber and you just want to read the full contents of this article, buy online access here.

Complimentary Subscribers, Editors or Members of the Editorial Board of the International Journal of Accounting and Finance (IJAF):
Login with your Inderscience username and password:

    Username:        Password:         

Forgotten your password?


Want to subscribe?
A subscription gives you complete access to all articles in the current issue, as well as to all articles in the previous three years (where applicable). See our Orders page to subscribe.

If you still need assistance, please email subs@inderscience.com