Abstract
This is an empirical study that investigates the effect of firm’s leverage on stock returns. For this purpose, new definitions of leverage and generalized method of movements (GMM) estimators were used. 102 listed companies for the period of 2003-2009 which met the criteria were chosen. The analysis was done at the firm and portfolio levels.Results indicate that returns have a negative and linear relation with leverage at the firm and portfolio levels.
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