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- Title
Broker-dealer Leverage and the Stock Market.
- Authors
Serletis, Apostolos; Istiak, Khandokar
- Abstract
This paper employs linear and nonlinear causality tests to examine (for the first time) the dynamic relation between broker-dealer leverage and the stock market in the United States, using quarterly data since 1967. We find significant linear causality from the stock market to broker-dealer leverage and a nonlinear feedback from broker-dealer leverage to the stock market, supporting the view that the macro economy is highly nonlinear. This bidirectional causality shows that a stock market crash might happen long before a fall in fundamental asset values.
- Subjects
UNITED States; STOCK exchanges; STOCKBROKERS; FINANCIAL leverage; MACROECONOMICS; MERTON Model
- Publication
Open Economies Review, 2018, Vol 29, Issue 2, p215
- ISSN
0923-7992
- Publication type
Article
- DOI
10.1007/s11079-017-9448-x