Building on the theoretical asset pricing literature, we examine the role of market risk and the size, book-to-market (BTM), and volatility anomalies in the cross-section of unlevered equity returns. Compared with levered (stock) returns, the unlevered market beta plays a more important role in...

This paper examines the cross-sectional relation between leverage and future stock returns. Prior research documents a puzzling negative correlation. We show that it is largely caused by firms' use of internal financing when having significant off-balance-sheet operating assets due to...

We use an international sample of 20 developed countries to test theories predicting an association between operating leverage with stock returns and the value premium. Results suggest that operating leverage is related to stock returns and the value premium across the sampled countries. These...