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Collateralizability and Asset Prices: Evidence from Structured Funds

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Listed:
  • Gregory Phelan

    (Williams College)

  • Wei Li

    (University of International Business and Economics)

  • Yongqin Wang

    (Fudan University)

Abstract

We test the asset-pricing implications of collateralizability using structured funds. The funds constitute a unique setting for allowing leveraged and unleveraged trading of the same set of assets, with continuous exogenous variations in leverage. Given the same fundamentals, we find that leveraged prices are higher than unleveraged prices. The difference is the collateral value, amounting to 6.4% of the leveraged price given an average leverage of 2.1. Furthermore, higher collateralizability leads to higher asset prices. Higher demand for leverage strengthens this impact and significantly contributes to collateral value. The findings provide causal evidence for collateral-based asset-pricing models.

Suggested Citation

  • Gregory Phelan & Wei Li & Yongqin Wang, 2024. "Collateralizability and Asset Prices: Evidence from Structured Funds," Department of Economics Working Papers 2025-102, Department of Economics, Williams College.
    • Handle: RePEc:wil:wileco:2025-102
    DOI: 10.36934/wecon:2025-102
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    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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