Homemade Leverage

What is 'Homemade Leverage'

Homemade leverage is 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.

BREAKING DOWN '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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    Learn the difference between levered free cash flow and unlevered free cash flow. Understand what a high unlevered free cash ... Read Answer >>
  3. Why is unlevered free cash flow important when reviewing a company's finances?

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  4. When is it better to use unlevered beta than levered beta?

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  5. How should investors interpret unlevered beta?

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