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022			_a0304-405X
245			_aLeverage constraints and asset prices: Insights from mutual fund risk taking / by Oliver Boguth, Mikhail Simutin _cOliver Boguth & Mikhail Simutin
260			_aAmsterdam _bElsevier _cFebruary 2018
300			_aPages 325-341
440			_aJournal of Financial Economics _v127 (2) _x0304-405X
500			_aAbstract Prior theory suggests that time variation in the degree to which leverage constraints bind affects the pricing kernel. We propose a measure for this leverage constraint tightness by inverting the argument that constrained investors tilt their portfolios to riskier assets. We show that the average market beta of actively managed mutual funds—intermediaries facing leverage restrictions—captures their desire for leverage and thus the tightness of constraints. Consistent with theory, it strongly predicts returns of the betting-against-beta portfolio, and is a priced risk factor in the cross-section of mutual funds and stocks. Funds with low exposure to the factor outperform high-exposure funds by 5% annually, and for stocks this difference reaches 7%. Our results show that the tightness of leverage constraints has important implications for asset prices.
690			_aLeverage constraints
690			_aAsset prices
690			_aBetting-against-beta
690			_aMutual fund performance
690			_aCross-section of stock returns
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