The Investigation about the Ability of Book-to-Market Ratio for Risk Proxy by Leverage-Based Approach

The research uses a leverage-based approach for investigation about the ability of book-to-market ratio for risk proxy. On the past researches and used model (pooled regression) and approach, we expected that effect of this ratio on historical stock returns, should be result of book leverage and market leverage factors. Our results confirm applied model. Therefore, book-to-market effect relates to market leverage and book leverage, and could be a proxy for risk.