Jacob Sparre Andersen

The performance of leveraged equity investment

The paper on leveraged equity investments which I have written with Mads Iversen (now at Gloucester Research) is finally in print as the latest paper in our series of analysis papers from Analytic Support Unit, Nykredit Asset Management.


We analyze leveraged equity investment products aimed at retail investors in terms of risk to total capital and median and average returns.

As the equity market boomed until the present crisis hit, this type of product became very popular in the Danish retail market, and is still being offered on various web sites [1, 2, 3].

We find that at high levels of leverage a large proportion of investors lose their entire capital — they get shut down. However, we also find that investors who survive experience very high returns.

In addition, we develop models that may be useful for determining appropriate leverage rates for other strategies.

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