Homemade Leverage

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DEFINITION of 'Homemade Leverage'

A substitution of risks that investors may undergo in order to move from overpriced shares in highly levered firms to those in unlevered firms by borrowing in personal accounts.

INVESTOPEDIA EXPLAINS 'Homemade Leverage'

Mainly attributed to the Modigliani-Miller Theorem, homemade leverage describes the situation where individuals borrowing on the exact same terms as large firms can duplicate corporate leverage through purchasing and financing options.

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