{'fraction_non_alphanumeric': 0.023289665211062592, 'fraction_numerical': 0.001455604075691412, 'mean_word_length': 5.3119266055045875, 'pattern_counts': {'":': 0, '<': 0, '<?xml version=': 0, '>': 0, 'https://': 0, 'lorem ipsum': 0, 'www.': 0, 'xml': 0}, 'pii_count': 0, 'substrings_counts': 0, 'word_list_counts': {'cursed_substrings.json': 0, 'profanity_word_list.json': 0, 'sexual_word_list.json': 0, 'zh_pornsignals.json': 0}}
Equity Returns in Leveraged Risky Businesses: Simple Analytics within CAPM

In a one-period limited liability economy, in which securities are fairly priced according to the CAPM, two, and only two, firm-specific characteristics affect stock returns: bankruptcy risk and cyclicality. The effects of expected cash flows, business risk, and leverage on returns are entirely subsumed by bankruptcy risk. The expected return on equity conditional on the return on the market converges asymptotically to -1. The resulting curvature in the shape of expected returns becomes more pronounced as either bankruptcy risk or cyclicality increases, and is entirely consistent with tenets of the CAPM.