Leverage
Financial Leverage — Bhandari 1988
Leverage
Quick facts
| Factor ID | Leverage |
| Display name | Financial Leverage |
| Family | Predictor |
| Category | Leverage |
| Direction | higher_expected_return |
| Status | supported |
| Paper | Bhandari 1988 |
| Source tables | balancesheet |
| Required fields | total_assets;total_equity |
| PIT required | yes |
| Coverage | 2010-04-27 – 2026-05-15 · 678,715 rows · 99.1% of panel |
Formula
total_assets / total_equity
Book asset-to-equity leverage using point-in-time statements.
China adaptation
Use book leverage because tradable debt market values are sparse for many A-share issuers.
Direction-adjusted cumulative return
Return metrics
| Metric | Value |
|---|---|
| Months in sample | 193 |
| Monthly mean | -0.3738% |
| Monthly std | 4.2549% |
| Annualized Sharpe | -0.30 |
| t-stat (simple) | -1.22 |
| Hit rate (months > 0) | 47.7% |
| Last 12M compounded | -6.79% |
| Cumulative wealth (start = 1) | 0.406 |
Recent 12 months
| Month | L/S return | Cumulative | Names |
|---|---|---|---|
| 2025-05 | -1.75% | 0.428 | 5134 |
| 2025-06 | -1.80% | 0.420 | 5145 |
| 2025-07 | -2.15% | 0.411 | 5147 |
| 2025-08 | +1.43% | 0.417 | 5150 |
| 2025-09 | +1.26% | 0.422 | 5157 |
| 2025-10 | -0.22% | 0.421 | 5163 |
| 2025-11 | -0.61% | 0.419 | 5168 |
| 2025-12 | -1.75% | 0.412 | 5182 |
| 2026-01 | +1.06% | 0.416 | 5181 |
| 2026-02 | +2.57% | 0.427 | 5186 |
| 2026-03 | -2.84% | 0.415 | 5187 |
| 2026-04 | -2.04% | 0.406 | 5185 |
Known data issues
Negative or tiny equity creates extreme leverage values.
Notes
Current formula is assets over equity rather than liabilities over assets.
See also: Leverage family, Factor library, Factor returns.