Path Dependence Of Leveraged Etf Returns
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Path Dependence Of Leveraged Etf Returns
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Author : Marco Avellaneda
language : en
Publisher:
Release Date : 2009
Path Dependence Of Leveraged Etf Returns written by Marco Avellaneda and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009 with categories.
It is well-known that leveraged exchange-traded funds (LETFs) don't reproduce the corresponding multiple of index returns over extended (quarterly or annual) investment horizons. In 2008, most leveraged ETFs underperformed the corresponding static strategies. In this paper, we study this phenomenon in detail. We give an exact formula linking the return of a leveraged fund with the corresponding multiple of the return of the unleveraged fund and its realized variance. This formula is tested empirically over quarterly horizons for 56 leveraged funds (44 double-leveraged, 12 triple-leveraged) using daily prices since January 2008 or since inception, according to the fund considered. The results indicate excellent agreement between the formula and the empirical data. The study also shows that leveraged funds can be used to replicate the returns of the underlying index, provided we use a dynamic rebalancing strategy. Empirically, we find that rebalancing frequencies required to achieve this goal are moderate, on the order of one week between rebalancings. Nevertheless, this need for dynamic rebalancing leads to the conclusion that leveraged ETFs as currently designed may be unsuitable for buy-and-hold investors.
Regime Switching Advantage In Statistical Arbitrage Strategies Conditioned On Time Series Momentum And Volatility In Leveraged Exchange Traded Funds
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Author : Nisheeth Saini
language : en
Publisher:
Release Date : 2019
Regime Switching Advantage In Statistical Arbitrage Strategies Conditioned On Time Series Momentum And Volatility In Leveraged Exchange Traded Funds written by Nisheeth Saini and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019 with Econometrics categories.
The phenomena of volatility decay (also known as time decay) and path dependence in leveraged exchange traded funds (ETF) markets have been documented in the literature. This dissertation examined whether it is possible to exploit these market conditions for leveraged ETF (LETF) trading using statistical arbitrage (StatArb) strategies. The study proposed a regime switching model tailored for LETF markets to predict volatility and time-series momentum in the behavior of the underlying indexes of the LETFs. The study then used this model to test short pair trading strategies on a varied set of commodity LETFs to see if theoretical intuitions informed by these analyses were empirically supported by data. The study also introduced the concept of lag relative expected volatility (LREV) based on inductive learning in a binary classification framework to model upward shocks in expected volatility on any given trading day. The results of this study showed that an active short pair trading strategy in commodity LETFs, conditioned on momentum and volatility, outperforms an unconditioned and passive sell-and-hold StatArb trading strategy on a risk-adjusted basis. This outperformance was, however, found to be present in Sortino ratios only. The study did not find any evidence of outperformance for the active trading strategy in either Sharpe ratios or absolute returns. The results also provided further evidence that LETFs tracking equity indexes are poor candidates for active StatArb trading strategies due to low volatility. Further, the results also indicated that any incremental deterioration in the efficiency of LETF products in rapidly fluctuating markets appears to be mostly attributable to systemic jumps in the implied volatility and less due to any incremental inefficiency in their daily rebalancing process. This finding may be of interest to the regulators. Lastly, the study also provided evidence from the LETF markets for an inverse relationship between volatility and momentum, as established in some recent studies.
Leveraged Exchange Traded Funds
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Author : Tim Leung
language : en
Publisher: Springer
Release Date : 2016-02-24
Leveraged Exchange Traded Funds written by Tim Leung and has been published by Springer this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016-02-24 with Mathematics categories.
This book provides an analysis, under both discrete-time and continuous-time frameworks, on the price dynamics of leveraged exchange-traded funds (LETFs), with emphasis on the roles of leverage ratio, realized volatility, investment horizon, and tracking errors. This study provides new insights on the risks associated with LETFs. It also leads to the discussion of new risk management concepts, such as admissible leverage ratios and admissible risk horizon, as well as the mathematical and empirical analyses of several trading strategies, including static portfolios, pairs trading, and stop-loss strategies involving ETFs and LETFs. The final part of the book addresses the pricing of options written on LETFs. Since different LETFs are designed to track the same reference index, these funds and their associated options share very similar sources of randomness. The authors provide a no-arbitrage pricing approach that consistently value options on LETFs with different leverage ratios with stochastic volatility and jumps in the reference index. Their results are useful for market making of these options, and for identifying price discrepancies across the LETF options markets. As the market of leveraged exchange-traded products become a sizeable connected part of the financial market, it is crucial to better understand its feedback effect and broader market impact. This is important not only for individual and institutional investors, but also for regulators.
Exchange Traded Funds And The New Dynamics Of Investing
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Author : Ananth N. Madhavan
language : en
Publisher: Oxford University Press
Release Date : 2016-06-28
Exchange Traded Funds And The New Dynamics Of Investing written by Ananth N. Madhavan and has been published by Oxford University Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016-06-28 with Business & Economics categories.
In Exchange-Traded Funds and the New Dynamics of Investing, Ananth Madhavan examines the quiet transformation of asset management through the rise of passive or index investing. A closely-related phenomenon is the rise of exchange-traded funds (ETFs). An ETF is an investment vehicle that trades intraday and seeks to replicate the performance of a specific index. ETFs have grown substantially in size, diversity, and market significance in recent years. These trends have generated considerable interest, especially from retail and institutional investors and increasingly from academics, regulators and the press. ETFs have the power to be a disruptive innovation to today's asset management industry because many traditional active managers and hedge funds deliver a significant fraction of their active returns via static exposures to factors like value. Indeed, for the first time ever, assets in global ETFs exceeded $3 trillion in 2015, passing the amount in hedge funds.
The Etf Handbook
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Author : David J. Abner
language : en
Publisher: John Wiley & Sons
Release Date : 2016-08-22
The Etf Handbook written by David J. Abner and has been published by John Wiley & Sons this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016-08-22 with Business & Economics categories.
Professional-level guidance on effectively trading ETFs in markets around the world The ETF Handbook is a comprehensive handbook for using Exchange Traded Funds, designed specifically for institutional investors and professional advisors seeking to improve ETF profitability. While ETFs trade like stocks, they are not stocks—and the differences impact every aspect of their use. This book provides full guidance toward effectively monitoring, analyzing, and executing ETFs, including the technical details you won't find anywhere else. You'll learn how they work, where they fit, and who is using them, as well as the resources that exist to provide access for investors. This new second edition includes updated coverage on how business has moved from niche to mainstream, ETF performance and issuers around the world, and changes to the users of ETFs in the US. The companion website features instructional video, as well as ready-to-use spreadsheets for calculating NAV and IIV. Most of the literature surrounding ETFs is geared toward individual investors or traders, but this book is written from the professional perspective—complete with the deeper mechanical information professionals require. Learn the analysis and execution methods specific to ETFs Discover why ETFs require a sophisticated level of skill Consider how ETFs perform in different market environments Examine the impact of managed ETF portfolio growth ETFs are incredibly flexible and valuable tools, but using them effectively demands a more sophisticated skillset, even among professional money managers and traders. Daily volumes and spreads do not tell the full story regarding availability and liquidity, and treating ETFs just like stocks can dramatically impact profits. The ETF Handbook is the professional's guide to the ETF markets worldwide with expert insight on the technical details that matter.
Interdisciplinary Research In Technology And Management
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Author : Satyajit Chakrabarti
language : en
Publisher: CRC Press
Release Date : 2021-09-14
Interdisciplinary Research In Technology And Management written by Satyajit Chakrabarti and has been published by CRC Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021-09-14 with Technology & Engineering categories.
The conference on ‘Interdisciplinary Research in Technology and Management” was a bold experiment in deviating from the traditional approach of conferences which focus on a specific topic or theme. By attempting to bring diverse inter-related topics on a common platform, the conference has sought to answer a long felt need and give a fillip to interdisciplinary research not only within the technology domain but across domains in the management field as well. The spectrum of topics covered in the research papers is too wide to be singled out for specific mention but it is noteworthy that these papers addressed many important and relevant concerns of the day.
The Missing Billionaires
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Author : Victor Haghani
language : en
Publisher: John Wiley & Sons
Release Date : 2023-09-06
The Missing Billionaires written by Victor Haghani and has been published by John Wiley & Sons this book supported file pdf, txt, epub, kindle and other format this book has been release on 2023-09-06 with Business & Economics categories.
Over the past century, if the wealthiest families had spent a reasonable fraction of their wealth, paid taxes, invested in the stock market, and passed their wealth down to the next generation, there would be tens of thousands of billionaire heirs to generations-old fortunes today. The puzzle of The Missing Billionaires is why you cannot find one such billionaire on any current rich list. There are a number of explanations, but this book is focused on one mistake which is of profound importance to all investors: poor risk decisions, both in investing and spending. Many of these families didn’t choose bad investments– they sized them incorrectly– and allowed their spending decisions to amplify this mistake. The Missing Billionaires book offers a simple yet powerful framework for making important lifetime financial decisions in a systematic and rational way. It's for readers with a baseline level of financial literacy, but doesn’t require a PhD. It fills the gap between personal finance books and the academic literature, bringing the valuable insights of academic finance to non-specialists. Part One builds the theory of optimal investment sizing from first principles, starting with betting on biased coins. Part Two covers lifetime financial decision-making, with emphasis on the integration of investment, saving and spending decisions. Part Three covers practical implementation details, including how to calibrate your personal level of risk-aversion, and how to estimate the expected return and risk on a broad spectrum of investments. The book is packed with case studies and anecdotes, including one about Victor’s investment with LTCM as a partner, and a bonus chapter on Liar’s Poker. The authors draw extensively on their own experiences as principals of Elm Wealth, a multi-billion-dollar wealth management practice, and prior to that on their years as arbitrage traders– Victor at Salomon Brothers and LTCM, and James at Nationsbank/CRT and Citadel. Whether you are young and building wealth, an entrepreneur invested heavily in your own business, or at a stage where your primary focus is investing and spending, The Missing Billionaires: A Guide to Better Financial Decisions is your must-have resource for thoughtful financial decision-making.
The Institutional Etf Toolbox
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Author : Eric Balchunas
language : en
Publisher: John Wiley & Sons
Release Date : 2016-03-07
The Institutional Etf Toolbox written by Eric Balchunas and has been published by John Wiley & Sons this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016-03-07 with Business & Economics categories.
Get up to speed on the booming innovation surrounding institutional ETF usage. The Institutional ETF Toolbox is the institutional investor's guide to utilizing exchange-traded funds and taking full advantage of the innovative new products in their expanding repertoire. The ETF toolbox is expanding rapidly with nearly one new ETF launching every day this decade so far. As with any financial innovation, this phenomenon brings both opportunity and concerns, as well as a dire need for clarity and strong due diligence skills. This book is both reference and resource, providing data-driven explanations backed by real-world market examples—alongside valuable insight from leading practitioners. Coverage includes an examination of the advantages and growth of ETFs as well as current and future uses of ETFs, emerging markets, and the strategic and tactical perspectives you need to effectively use ETFs to optimal effect. The major concerns surrounding ETFs are addressed in full to give you the background you need to formulate a better ETF strategy. ETF allocations are expected to keep growing rapidly across all institutional types, and new and emerging products are becoming more and more liquid allowing easier expression of investment opinion. This book shows you how any investors can utilize these tools to strengthen your portfolio and safely expand into particularly appealing areas. Understand how the ETF ticks and the how to take advantage of all the myriad of advantages Learn how to perform effective due diligence using exposure, cost, liquidity, risk and structure Utilize ETFs for cash equitization, portfolio rebalancing, liquidity management, and more Learn how ETFs are expanding into equities, fixed income, emerging markets, and alternatives Learn how to avoid unwanted costs, liquidity issues and hidden complexities ETF usage is climbing with assets growing by about 25 percent per year, and those who use them expect to expand their usage quickly. The Institutional ETF Toolbox provides the actionable information institutions need to identify and adopt the most suitable approach.
The Exchange Traded Funds Manual
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Author : Gary L. Gastineau
language : en
Publisher: John Wiley & Sons
Release Date : 2010-05-20
The Exchange Traded Funds Manual written by Gary L. Gastineau and has been published by John Wiley & Sons this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010-05-20 with Business & Economics categories.
Full coverage of ETF investments from an expert in the field The initial edition of Gary Gastineau's The Exchange-Traded Fund Manual was one of the first books to describe and analyze ETFs. It made the case for the superiority of the structure of investor-friendly ETFs over mutual funds and helped investors select better funds among the ETFs available. With this new edition, Gastineau provides comprehensive information on the latest developments in ETF structures, new portfolio variety, and new trading methods. With a realistic evaluation of today's indexes, Gastineau offers insights on actively managed ETFs, improved index funds, and fund and advisor selection. Discusses how to incorporate ETFs into an investment plan Offers updated coverage of new ETFs, including full-function actively managed ETFs, and a valuable chapter on trading ETFs Written by the leading authority on exchange traded funds Exchange-traded funds offer you diversification and participation in markets and investment strategies that have not been available to most investors. If you want to understand how to use ETFs effectively, the Second Edition of The Exchanged-Traded Fund Manual can show you how.
Indices Index Funds And Etfs
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Author : Michael I. C. Nwogugu
language : en
Publisher: Springer
Release Date : 2019-03-09
Indices Index Funds And Etfs written by Michael I. C. Nwogugu and has been published by Springer this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019-03-09 with Business & Economics categories.
Indices, index funds and ETFs are grossly inaccurate and inefficient and affect more than €120 trillion worth of securities, debts and commodities worldwide. This book analyzes the mathematical/statistical biases, misrepresentations, recursiveness, nonlinear risk and homomorphisms inherent in equity, debt, risk-adjusted, options-based, CDS and commodity indices – and by extension, associated index funds and ETFs. The book characterizes the “Popular-Index Ecosystems,” a phenomenon that provides artificial price-support for financial instruments, and can cause systemic risk, financial instability, earnings management and inflation. The book explains why indices and strategic alliances invalidate Third-Generation Prospect Theory (PT3), related approaches and most theories of Intertemporal Asset Pricing. This book introduces three new decision models, and some new types of indices that are more efficient than existing stock/bond indices. The book explains why the Mean-Variance framework, the Put-Call Parity theorem, ICAPM/CAPM, the Sharpe Ratio, Treynor Ratio, Jensen’s Alpha, the Information Ratio, and DEA-Based Performance Measures are wrong. Leveraged/inverse ETFs and synthetic ETFs are misleading and inaccurate and non-legislative methods that reduce index arbitrage and ETF arbitrage are introduced.