Abstract In this paper, we evaluate the cross sectional relationship between firm characteristics, financial leverage, and stock returns for Indian market. The study finds that there is a strong size and value effect existing in the return pattern of stocks. Further the study finds a complex pattern between leverage and stock returns in Indian context. GRS test confirm the robustness of three factor models with market, size and leverage over Fama-French three factor model in most of the cases. Wald test confirms that the effect of value and leverage are same in determining the portfolio returns in most of the cases. So, while making investment decisions along with size one should consider both the firm specific variables value and leverage as size and value alone cannot disentangle all the variation in equity returns due to firm specific productivity from the variation due to financial leverage. Further study finds that portfolios formed using size (MC) breakpoints is sensitive to the results, whereas value (P/B) and leverage (D/E) breakpoints are insensitive to the result.

中文翻译：

---

杠杆效应可以与价值效应共存吗？

摘要在本文中，我们评估了印度市场的公司特征，财务杠杆和股票收益之间的横断面关系。研究发现，股票收益模式存在很大的规模和价值效应。进一步的研究发现，在印度背景下，杠杆与股票收益之间存在复杂的关系。在大多数情况下，GRS测试证实了三因素模型在市场，规模和杠杆方面的鲁棒性高于Fama-French三因素模型。Wald检验证实，在大多数情况下，价值和杠杆效应在确定投资组合收益方面是相同的。所以，在制定投资决策和规模决策时，应同时考虑公司特定变量的价值和杠杆率，因为仅凭规模和价值无法将因公司特定生产率而产生的所有股权收益变化与因财务杠杆而引起的变化区分开。进一步的研究发现，使用规模（MC）断点形成的投资组合对结果敏感，而价值（P / B）和杠杆（D / E）断点对结果不敏感。