Title: The Effect of Risk-Based Factors on The Value Premium

This thesis examines the effect of operating leverage and financial leverage on the value premium in the Finnish stock markets 2002-2012. The purpose of the thesis is to examine whether operating leverage and financial leverage affect firm`s BE/ME and stock returns. The accounting data has been collected from Amadeus database and market-based data from the Datastream database. Sample used in this thesis covers years from 1998 to 2012. This thesis confirms the findings of previous research of tight con-nection between operating leverage and BE/ME and reinforces the findings of previous research that relation between financial leverage and BE/ME is not ro-bust. In turn, relation between operating leverage, BE/ME and stock returns is not clearly perceived during the 2002-2012 period in the Finnish stock markets