This paper shows empirically how asset risk and financial leverage interact to explain the equity risk dynamics of value versus growth stocks. During economic downturns, the asset betas and leverage of value firms increase, contributing to a sharp rise in equity betas. Asset betas of growth...

Several measures of credit-market booms are known to precede downturns in real economic activity. We offer an early indicator for all known measures of credit booms. Our measure is based on intra-family flow shifts towards high-yield bond mutual funds. It predicts indicators such as growth in...