Jacquier, Eric; Titman, Sheridan; YalçIn, Atakan - In: Journal of Empirical Finance 17 (2010) 5, pp. 991-1005
In accordance with the well-known financial leverage effect, decreases in stock prices cause an increase in the levered equity beta for a given unlevered beta. However, as growth options are more volatile and have higher risk than assets in place, a price decrease may decrease the unlevered...