Source code for skfolio.descriptor._leverage._market_leverage
"""Market leverage descriptor."""
# Copyright (c) 2023-2026
# Author: Hugo Delatte <hugo.delatte@skfoliolabs.com>
# SPDX-License-Identifier: BSD-3-Clause
from __future__ import annotations
import numpy as np
from skfolio.containers import AssetPanel
from skfolio.descriptor._base import BaseDescriptor
from skfolio.typing import FloatArray
from skfolio.utils.stats import safe_divide
from skfolio.utils.validation import validate_asset_panel
[docs]
class MarketLeverage(BaseDescriptor, stateless=True):
r"""Market leverage descriptor.
Computes the proportion of total capital (at market value) financed by debt:
.. math::
\text{market\_leverage}(t) =
\frac{\text{total\_debt}(t)}
{\text{total\_debt}(t) + \text{market\_cap}(t)}
Market leverage blends accounting data (total debt) with market data (market
capitalization). Unlike :class:`BookLeverage`, the denominator updates daily with
the stock price, making it more responsive to changes in the firm's risk profile.
When a stock drops sharply, market leverage rises immediately, capturing the
increased financial risk before any accounting restatement [1]_.
NaNs are allowed as missing observations and propagate to the output. Non-missing
`total_debt` values must be finite. Non-missing `market_cap` values must be finite
and strictly positive.
When `total_debt` is non-negative and given that `market_cap` is non-negative by
construction, the ratio is bounded in :math:`[0, 1)`. This makes it the most
numerically well-behaved of the leverage descriptors, requiring no special
treatment for negative-equity firms.
Parameters
----------
None
Attributes
----------
n_assets_ : int
Number of assets seen during fitting.
asset_names_ : ndarray of shape (n_assets,)
Asset names seen during fitting.
References
----------
.. [1] "Capital structure decisions: which factors are reliably important?"
Financial Management. Frank, M. Z., & Goyal, V. K. (2009).
See Also
--------
DebtToAssets : Leverage relative to total assets.
BookLeverage : Leverage as a fraction of total book capital.
Examples
--------
>>> from skfolio.datasets import make_synthetic_characteristics
>>> from skfolio.descriptor import MarketLeverage
>>>
>>> X = make_synthetic_characteristics()
>>>
>>> descriptor = MarketLeverage()
>>> market_leverage = descriptor.fit_transform(X)
"""
