Download or read book The Influences of the Market Sentiment on Tracking Performance of the Leveraged and Inverse ETF written by Chen-fu Lee and published by . This book was released on 2020 with total page 122 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study takes Taiwan's leveraged ETF and inverse ETF as object of study to track the difference of performance under different market sentiment compared with traditional ETF. In order to objectively define the state of market sentiment, the two-section threshold autoregressive (TAR) method is used to estimate panic index, and market sentiment is divided into two states, pessimistic and optimistic, to observe the difference in tracking performance under different market sentiment. In addition, considering the occurrence of Sino-US trade war and the structural changes and impacts of the global economy, the threshold values of the two periods before and after the trade war are estimated to capture the threshold effects that vary from time to time based on the starting date of the Sino-US trade war. In view of the structural changes and impacts of the Sino-US trade war on the global economy, this paper also tests the referential value of VIX as an indicator of market sentiment response and price discovery. Secondly, different from traditional ETF which directly holds the target commodities to copy profits and losses, leverage ETF and inverse ETF build leverage by investing in derivative commodities such as futures to track holdings in the spot market and futures market. The trading system, liquidity and investors' operational needs are different, which will affect the tracking ability of ETF. Therefore, this paper uses DCC-GARCH model to detect whether there is asymmetric relationship between various ETF and the tracking target market, and incorporates the mentioned threshold differences into the model, hoping to understand the changes in tracking performance by capturing the changes in dynamic correlation coefficients. In addition, this paper also discusses the differences of correlation coefficient and tracking error between ETF and its tracking target in different major economic events, which can be used as a reference for investors to avoid risks when they expect the market to fall. The empirical results show that the poor tracking performance of leveraged ETF and inverse ETF results in an asymmetric inverse relationship between trading volume and return, and the tracking error is taken as the reference basis for investors to buy and hold ETF, which may lead to investment decision errors. After the Sino-US trade war, due to changes in economic structure, the market volatility and expectation panic has increased, worsening the tracking performance of traditional ETF and leveraged ETF. The panic index has no threshold effect after the Sino-US trade war and cannot effectively reflect the emotional state of the market. Moreover, it has no price discovery ability under high fluctuation. After taking into consideration the event factors, this paper finds that the tracking performance of traditional ETF shows significant differences and the impact of financial events on tracking errors is significantly greater than monetary policy, economic structural changes and non-financial events.
Download or read book Leveraged Exchange Traded Funds written by Peter Miu and published by Springer. This book was released on 2016-04-29 with total page 174 pages. Available in PDF, EPUB and Kindle. Book excerpt: Leveraged Exchange-Traded Funds (LETFs) are publicly-traded funds that promise to provide daily returns that are in a multiple (positive or negative) of the returns on an index. To meet that promise, the funds use leverage, which is typically obtained through derivatives such as futures contracts, forward contracts, and total-return swaps. As of the end of 2012, there were over 250 LETFs in North America with total assets of approximately $32.24 billion. While the amount of assets held by these funds is still small, their popularity continues to grow as their trading volume is significantly larger and much more dynamic than traditional, non-leveraged ETFs. This comprehensive guide to LETFs provides high-level practitioners and researchers with a detailed reference tool for navigating the market and making informed investment decisions. Written from a measured analytical perspective, Miu and Charupat use clear and concise explanations of all important aspects of LETFs, focusing on such key elements as structure, pricing, performance, regulations, taxation, and trading strategies. The first two chapters set the stage for the book by identifying exactly what LETFs are and how they are regulated. The following chapters then look to bridge theory with practice to dive deep into the mechanics, portfolio rebalancing techniques, and daily compounding effects that make investing in these funds so lucrative.
Download or read book Quantum Fading Strategies for Leveraged and Inverse ETFs written by Andreas Cseh and published by Anchor Academic Publishing. This book was released on 2013-08 with total page 64 pages. Available in PDF, EPUB and Kindle. Book excerpt: Suppose the market is going to ‘crash’. What would you do? The most common answer would probably be: Sell what you have and get out of it. However, what if you have nothing to sell? A couple of years ago, simple investors would have said: ‘Stay on the sidelines’. The sophisticated and professionals always had plenty of avenues, such as shorting the stock, buying put options or selling naked calls. The gap was narrowed with the arrival of leveraged and inverse ETFs. These allow even novice investors to short the market in a less risky way. Traditional ETFs track an index or basket in a one-for-one approach, basically they are managed passively. In contrast, leveraged and inverse ETFs are intraday traded, and shouldn’t be confused with more-vanilla ETFs. Leveraged ETFs require active management which involves the borrowing of funds to purchase additional shares (bullish LETFs) or the short-selling (bearish LETFs) and the rebalance of the position on a daily basis. At present, most levered ETFs are either 2X, 3X, -2X, or 3X, and therefore they give investors the possibility to earn two or three times (and loose two or three times) the daily return of a simple long or short position in the index. These levered ETFs have leverage (borrowing) built into their structure, thus eliminating the need for investors to do their own borrowing (margin, futures, swaps etc.) or short-selling. But, the leveraging process is built to achieve an objective quite different from that of the simple and classical ETF.
Download or read book Understanding the Risk of Investing with ETFs and Why They Still Beat Mutual Funds written by Jeffrey Feldman and published by Pearson Education. This book was released on 2010-09-13 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: This is the eBook version of the printed book. This Element is an excerpt from Three Paths to Profitable Investing: Using ETFs in Healthcare, Infrastructure, and the Environment to Grow Your Assets (9780137054268) by Jeffrey Feldman and Andrew Hyman. Available in print and digital formats. Systematically evaluate the risks of ETFs, so you can use them more safely and profitably. Despite their advantages, ETFs (Exchange Traded Funds) are not risk free. No investment is. However, understanding the risks that are particular to ETFs helps investors prepare for unforeseen events and build their portfolios. The first risk to understand is index risk. ETFs are designed to match an index and are passive investments.
Download or read book The Ultimate Guide to Trading ETFs written by Don Dion and published by John Wiley & Sons. This book was released on 2010-11-23 with total page 224 pages. Available in PDF, EPUB and Kindle. Book excerpt: An essential guide to trading trends with ETFs At any given time, a particular country's market or a particular segment of the market-such as energy or technology-might be booming. The Ultimate Guide To Trading ETFs provides a time-tested strategy for using exchange-traded funds (ETFs) to profit from these trending markets and sectors. By monitoring the performance of ETFs, authors Don Dion and Carolyn Dion show how to capitalize on these fast-moving, ever-changing trends. He then discusses how to stay ahead of the curve by identifying markets and sectors that are gathering momentum and monitoring those markets for signs that the momentum is losing steam. Dion also explains how you can build a balanced portfolio of ETFs and manage your allocations to profit from the shifting trends. Provides advice for both aggressive investors who are willing to utilize leveraged and short market ETFs, as well as more conservative investors who want to limit risk Highlights a wide variety of ETFs currently available to investors Shows how to profit from fast-developing trends across all markets and sectors The world of ETFs has created many options for individual investors, and The Ultimate Guide To Trading ETFs shows you how to make the most of those opportunities.
Download or read book Market Microstructure written by United States. Congress. Senate. Committee on Banking, Housing, and Urban Affairs. Subcommittee on Securities, Insurance, and Investment and published by . This book was released on 2012 with total page 76 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Leveraged Exchange Traded Funds written by Peter Miu and published by Palgrave Macmillan. This book was released on 2016-01-05 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Leveraged Exchange-Traded Funds (LETFs) are publicly-traded funds that promise to provide daily returns that are in a multiple (positive or negative) of the returns on an index. To meet that promise, the funds use leverage, which is typically obtained through derivatives such as futures contracts, forward contracts, and total-return swaps. As of the end of 2012, there were over 250 LETFs in North America with total assets of approximately $32.24 billion. While the amount of assets held by these funds is still small, their popularity continues to grow as their trading volume is significantly larger and much more dynamic than traditional, non-leveraged ETFs. This comprehensive guide to LETFs provides high-level practitioners and researchers with a detailed reference tool for navigating the market and making informed investment decisions. Written from a measured analytical perspective, Miu and Charupat use clear and concise explanations of all important aspects of LETFs, focusing on such key elements as structure, pricing, performance, regulations, taxation, and trading strategies. The first two chapters set the stage for the book by identifying exactly what LETFs are and how they are regulated. The following chapters then look to bridge theory with practice to dive deep into the mechanics, portfolio rebalancing techniques, and daily compounding effects that make investing in these funds so lucrative.
Download or read book Anomalies in Taylor Series and Tracking Errors and Homomorphisms in the Returns of Leveraged Inverse ETFs and Synthetic ETFs Funds written by Michael C. I. Nwogugu and published by . This book was released on 2015 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: While Leveraged/Inverse ETFs, synthetic funds and synthetic ETFs have grown in popularity during the last fifteen years, there are many structural problems inherent in the legal/economic structure of these ETFs. These problems raise actionable issues of “Suitability” and “fraud” under US securities laws, because the advertised terms of most Leveraged/Inverse ETFs, synthetic funds and synthetic ETFs are mis-leading, and they have substantial tracking errors and can increase market volatility. This article contributes to the existing literature by: i) critiquing the structure of Leveraged/Inverse ETFs, synthetic funds and synthetic ETFs and the inherent decision-making processes (ie. creation and use of the ETFs; re-balancing; biases), ii) showing how Put Call Parity Theorem affects the accuracy of Leveraged/Inverse ETFs and synthetic ETFs; iii) analyzing and showing how Leveraged/Inverse ETFs increase market volatility; iv) explaining the biases and effects inherent in Leveraged/Inverse ETFs and synthetic funds/ETFs such as new types of tracking errors and the downward drift in returns which are Homomorphisms - and which were omitted in Reigneron, Allez & Bouchaud (2011); Avellaneda & Zhang (2010); Bouchaud & Potters (2001); Kenett, et.al. (2012); Tang & Xu (2013); Charupat & Miu (2011); Hongfei & Xu (2013); and Dobi & Avellaneda (2012); and v) explaining an anomaly in the Taylor Series. Hence, these issues have implications for analysis of nonlinearity and chaos in markets.
Download or read book ETFs and Systemic Risks written by Ayan Bhattacharya and published by CFA Institute Research Foundation. This book was released on 2020-01-22 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: Exchange-traded funds (ETFs) revolutionized asset markets by using an innovative structure to make investing in a wide variety of asset classes simpler and cheaper. With their growing importance has come increasing concern that these products pose new risks to market stability and performance. This paper examines whether ETFs affect systemic risks in financial markets and, if they do, what the mechanism is by which this impact occurs and what can be done to keep the risks under control. We review current research and empirical evidence on these issues and discuss some emerging risks in ETFs. We ask whether we have the right “rules of the road” to deal with the new drivers of market behavior.
Download or read book The Performance of Leveraged and Inverse Leveraged Exchange Traded Funds written by Brian J. Henderson and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We document significant abnormal daily returns to leveraged and inverse leveraged exchange-traded funds (ETFs). Abnormal returns are positive for leveraged funds and negative to inverse leveraged funds, and the magnitude increases in the absolute value of the leverage multiple. We propose and test a model linking the abnormal return performance to transactions costs associated with the frequent (daily) rebalancing necessary to maintain target exposures as well as other costs including the swap financing costs and the cost to borrow in the lending market. In the full cross-section, the results suggest funding costs associated with achieving leverage impact returns negatively (positively) for leveraged (inverse leveraged) funds. Capitalizing on a key institutional feature, analysis of pairs of mirror funds reveals transactions costs associated with the maintenance of daily leverage multiples meaningfully impact fund returns. The results are also consistent with inverse leveraged funds bearing the cost-to-borrow to the benefit of the leveraged (long) funds.
Download or read book Performance of the Leveraged and Inverse ETFs and Their Multiples written by Yi-Ting Chiang and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Tracking Error of Leveraged and Inverse ETFs written by John A. Romano and published by . This book was released on 2012 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Tracking ability of leveraged and inverse exchange traded funds can be very important to investors looking for a dependable return. If the investor wants to put their money on a certain index they feel strongly about, they expect their investment vehicle to track that return appropriately. Over the years, we have seen tremendous growth in the exchange traded fund industry. In 2006, leveraged and inverse funds were introduced to the market, allowing investors to take leveraged and directional trades on indices. These investment vehicles can be traded as easily as any stock, and therefore need some attention. Since any novice investor can access and trade these funds, they need to be aware of the risks they are taking.
Download or read book Measuring the Performance of Exchange traded Funds written by Zhang Xiaying and published by . This book was released on 2018 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: The purpose of this thesis is to measure the performance of exchange-traded funds (ETFs) from the year 2012 to 2016. I include 312 ETFs from developed markets and 61 ETFs from emerging markets in the sample. I compare the performance of the ETFs with their corresponding benchmark indices and compare the performance of the developed market ETFs with the emerging market ETFs and I find that all of the ETFs underperform their underlying benchmark indices. I use the tracking error of the ETF as a measure of its performance and I define the tracking error as the difference between the return of the ETF and the return of its underlying benchmark index and I expect the tracking error to be significant. Using the absolute value of the difference between the return on ETFs and their underlying benchmark indices and the standard errors of regression models which measure the relationship between those returns as the estimate of tracking error, the results indicate that the tracking error is significantly different from zero. However there is no evidence that ETFs in developed markets have better performance than ETFs in emerging markets. I use the 3-month U.S Treasury bill rate as an estimate of the risk-free rate and determine the risk-adjusted performance of both ETFs and their underlying benchmark indices. Finally, I analyze the impact of different variables on the ETF's tracking error using a regression analysis, the results indicate that both daily volatility and dividend yield exert significant influence on tracking errors of ETFs in both developed markets and emerging markets.
Download or read book Mutual Funds and Exchange traded Funds written by Harold Kent Baker and published by Oxford University Press, USA. This book was released on 2016 with total page 663 pages. Available in PDF, EPUB and Kindle. Book excerpt: Mutual Funds and Exchange-Traded Funds: Building Blocks to Wealth provides a fresh look at this intriguing but often complex subject. Its coverage spans the gamut from theoretical to practical coverage.
Download or read book Evaluating the Seasonality and Persistence of ETFs Performance and Volatility written by Gerasimos Georgiou Rompotis and published by . This book was released on 2009 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: By breaking down ETFs in broad, sector and international market categories as well as in large, medium and small cap classes of capitalization we demonstrate that a substantially positive November effect influences the performance of all ETF market categories and classes of capitalization. We also reveal the existence of a strong reverse December effect along with a modest reverse effect that affect the ETFs' volatility. The modest November effect in risk is accompanied by a strong reverse November effect in tracking error related to all ETF categories and classes. Moreover, we provide slight evidence for persistence in ETFs' November performance and strong evidence for persistence in ETFs' November risk and tracking error. Further research indicates that the investing strategies which respect the November patterns in ETFs' performance can beat the buy and hold strategies on an average and accumulated level during a five-year period and that investors can gain significant returns if they allow themselves to be exposed in greater level of volatility.
Download or read book The Golden Target written by Tim Leung and published by . This book was released on 2015 with total page 20 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies the empirical tracking performance of leveraged ETFs on gold, and their price relationships with gold spot and futures. For tracking the gold spot, we find that our optimized portfolios with short-term gold futures are highly effective in replicating prices. The market-traded gold ETF (GLD) also exhibits a similar tracking performance. However, we show that leveraged gold ETFs tend to underperform their corresponding leveraged benchmark. Moreover, the underperformance worsens over a longer holding period. In contrast, we illustrate that a dynamic portfolio of gold futures tracks significantly better than various static portfolios. The dynamic portfolio also consistently outperforms the respective market-traded LETFs for different leverage ratios over multiple years.
Download or read book Understanding the Tracking Errors of Commodity Leveraged ETFs written by Kevin Guo and published by . This book was released on 2015 with total page 22 pages. Available in PDF, EPUB and Kindle. Book excerpt: Commodity exchange-traded funds (ETFs) are a significant part of the rapidly growing ETF market. They have become popular in recent years as they provide investors access to a great variety of commodities, ranging from precious metals to building materials, and from oil and gas to agricultural products. In this article, we analyze the tracking performance of commodity leveraged ETFs and discuss the associated trading strategies. It is known that leveraged ETF returns typically deviate from their tracking target over longer holding horizons due to the so-called volatility drag. This motivates us to construct a benchmark process that accounts for the volatility drag, and use it to examine the tracking performance of commodity leveraged ETFs. From empirical data, we find that many commodity leveraged ETFs underperform significantly against the benchmark, and we quantify such a discrepancy via the novel idea of realized effective fee. Finally, we consider a number of trading strategies and examine their performance by backtesting with historical price data.
