The Influences Of The Market Sentiment On Tracking Performance Of The Leveraged And Inverse Etf
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The Influences Of The Market Sentiment On Tracking Performance Of The Leveraged And Inverse Etf
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Author : Chen-fu Lee
language : en
Publisher:
Release Date : 2020
The Influences Of The Market Sentiment On Tracking Performance Of The Leveraged And Inverse Etf written by Chen-fu Lee and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020 with categories.
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.
Leveraged Exchange Traded Funds
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Author : Peter Miu
language : en
Publisher: Springer
Release Date : 2016-04-29
Leveraged Exchange Traded Funds written by Peter Miu and has been published by Springer this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016-04-29 with Business & Economics categories.
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.
Quantum Fading Strategies For Leveraged And Inverse Etfs
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Author : Andreas Cseh
language : en
Publisher: Anchor Academic Publishing
Release Date : 2013-08
Quantum Fading Strategies For Leveraged And Inverse Etfs written by Andreas Cseh and has been published by Anchor Academic Publishing this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013-08 with Business & Economics categories.
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.
Measuring The Performance Of Exchange Traded Funds
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Author : Zhang Xiaying
language : en
Publisher:
Release Date : 2018
Measuring The Performance Of Exchange Traded Funds written by Zhang Xiaying and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018 with categories.
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.
Leveraged Exchange Traded Funds
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Author : Peter Miu
language : en
Publisher: Palgrave Macmillan
Release Date : 2016-01-05
Leveraged Exchange Traded Funds written by Peter Miu and has been published by Palgrave Macmillan this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016-01-05 with Business & Economics categories.
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.
Are Concerns About Leveraged Etfs Overblown
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Author : Federal Reserve Federal Reserve Board
language : en
Publisher:
Release Date : 2016-04-06
Are Concerns About Leveraged Etfs Overblown written by Federal Reserve Federal Reserve Board and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016-04-06 with categories.
Leveraged and inverse exchange-traded funds seek to track a multiple of the performance of an underlying index, commodity, currency, or some other benchmark over a specified time frame, which is usually one day. These products have been heavily criticized based on the belief that they exacerbate volatility in financial markets. Commentators have referred to them as "weapons of mass destruction" and claim that they pose "serious threats to market stability" because they "have turned the market into a casino on steroids." Others have claimed that leveraged ETFs "could send volatility through the roof, and prices through the floor." It appears as though policy makers are also concerned about these products, as the Securities and Exchange Commission has issued a moratorium on approving excemtive requests for new leveraged and inverse ETFs.
Anomalies In Taylor Series And Tracking Errors And Homomorphisms In The Returns Of Leveraged Inverse Etfs And Synthetic Etfs Funds
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Author : Michael C. I. Nwogugu
language : en
Publisher:
Release Date : 2015
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 has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015 with categories.
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.
The Golden Target
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Author : Tim Leung
language : en
Publisher:
Release Date : 2015
The Golden Target written by Tim Leung and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015 with categories.
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.
Performance Of The Leveraged And Inverse Etfs And Their Multiples
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Author : Yi-Ting Chiang
language : en
Publisher:
Release Date : 2017
Performance Of The Leveraged And Inverse Etfs And Their Multiples written by Yi-Ting Chiang and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with categories.
Market Microstructure
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Author : United States. Congress. Senate. Committee on Banking, Housing, and Urban Affairs. Subcommittee on Securities, Insurance, and Investment
language : en
Publisher:
Release Date : 2012
Market Microstructure written by United States. Congress. Senate. Committee on Banking, Housing, and Urban Affairs. Subcommittee on Securities, Insurance, and Investment and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012 with Exchange traded funds categories.