Investors can always use leverage to get higher risk and higher returns if they want.
Do they really get higher expected returns from that?
I know they do when the market isn’t efficient (relative to the specific investor), but that doesn’t help me.
I think the answer is yes. I would say it is a very similar strategy to that of corporate financial management and using financial leverage to improve returns and earnings.
US taxes treat corporate debt financing more favorably than corporate equity financing, which may be distorting companies towards higher leverage.
Investors can always use leverage to get higher risk and higher returns if they want.
Do they really get higher expected returns from that?
I know they do when the market isn’t efficient (relative to the specific investor), but that doesn’t help me.
I think the answer is yes. I would say it is a very similar strategy to that of corporate financial management and using financial leverage to improve returns and earnings.
US taxes treat corporate debt financing more favorably than corporate equity financing, which may be distorting companies towards higher leverage.