The market impact of leveraged ETFs: A Survey of the literature
I survey the literature related to the potential for leveraged and inverse ETFs to influence late-day asset prices. The literature consistently reports statistically significant associations between ETF rebalancing demand and late-day returns and volatility. However, most of the available papers suf...
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| Format: | Article |
| Language: | English |
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AIMS Press
2024-12-01
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| Series: | Quantitative Finance and Economics |
| Subjects: | |
| Online Access: | https://www.aimspress.com/article/doi/10.3934/QFE.2024031 |
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| Summary: | I survey the literature related to the potential for leveraged and inverse ETFs to influence late-day asset prices. The literature consistently reports statistically significant associations between ETF rebalancing demand and late-day returns and volatility. However, most of the available papers suffer from potentially serious methodological errors, and the economic associations appear to be insignificant. Moreover, the broader literature suggests that the market provides enough liquidity to satisfy LETF rebalancing demand with an insignificant degradation of market quality. Despite the potential for LETF rebalancing to affect late-day market conditions, concerns raised by policymakers and others are not supported by the overall empirical evidence. |
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| ISSN: | 2573-0134 |