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The Impact of Financial Leverage on the Pricing Risk in the Egyptian Stock Market

Author

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  • Mustafa Hussein Abd-Allah

    (Sadat Academy for Management Sciences, Cairo, Egypt)

  • Wael Ibrahim Abdelrahim Hamimy

    (Sadat Academy for Management Sciences, Cairo, Egypt)

Abstract

This paper examines the impact of financial leverage on the risk pricing in the Egyptian Stock Exchange (EGX) by adding an additional risk factor reflecting financial leverage to the three factor model of Fama and French. We used monthly excess stock returns of 50 stocks listed on the (EGX) from January 2014 to December 2018 to test Fama and French model before and after adding the financial leverage factor. Total debt to equity ratio was used to calculate the financial leverage. The results do not support Fama and French model before and after adding the financial leverage factor, therefore there is no effect of financial leverage on the risk pricing.

Suggested Citation

  • Mustafa Hussein Abd-Allah & Wael Ibrahim Abdelrahim Hamimy, 2024. "The Impact of Financial Leverage on the Pricing Risk in the Egyptian Stock Market," Journal of Financial Studies, Institute of Financial Studies, vol. 16(9), pages 11-22, May.
    • Handle: RePEc:fst:rfsisf:v:16:y:2024:i:9:p:11-22
    DOI: 10.55654/JFS.2024.9.16.01
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    References listed on IDEAS

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    More about this item

    Keywords

    Fama and French three-factor model; Financial leverage.;

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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