Stats › Gestion active, passive et flux › Capping leverage
Capping leverage improved returns by 18 percentage points and pushed the same traders into more volatile stocks
| Mesure | Estimate | Significance | Étude |
|---|---|---|---|
| High minus low return, US 50 to 1 cap | +18 points | None reported for the raw return | Heimer and Simsek, 2017 |
| The same effect on alphas | +19 points | p about 1% | Heimer and Simsek |
| Volume de transactions | -0.265, about -23% | Standard error 0.094, 1% | Heimer and Simsek |
| Bid ask spreads | -0.011 and -0.014 | Not different from zero | Heimer and Simsek |
| Leverage used after the European caps | -1.8665, from about 6.6 to 4.7 | Reported as highly significant | Pelster |
| Aggregate risk, leverage times volatility | -0.1830 | t = 20.13 | Pelster |
The first study uses United States retail foreign exchange traders after the 18 October 2010 compliance date with European traders as the control. The second uses 49,696 investors on one European platform from March to December 2018, with non EU residents of the same platform as the control.
The United States 50 to 1 cap raised the high minus low return by 18 percentage points against European traders. The European caps cut leverage used by 1.87 and sent the same investors into higher volatility shares and cryptocurrency instead.
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