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 |
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| Online Access: | https://www.aimspress.com/article/doi/10.3934/QFE.2024031 |
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| author | Stephen L. Lenkey |
| author_facet | Stephen L. Lenkey |
| author_sort | Stephen L. Lenkey |
| collection | DOAJ |
| description | 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. |
| format | Article |
| id | doaj-art-7c91c01724694a4ebb80c3292b0cf036 |
| institution | Kabale University |
| issn | 2573-0134 |
| language | English |
| publishDate | 2024-12-01 |
| publisher | AIMS Press |
| record_format | Article |
| series | Quantitative Finance and Economics |
| spelling | doaj-art-7c91c01724694a4ebb80c3292b0cf0362025-01-24T01:12:55ZengAIMS PressQuantitative Finance and Economics2573-01342024-12-018481584010.3934/QFE.2024031The market impact of leveraged ETFs: A Survey of the literatureStephen L. Lenkey0Smeal College of Business, Pennsylvania State University, University Park, PA, 16802, USAI 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.https://www.aimspress.com/article/doi/10.3934/QFE.2024031leveraged etfslate-day returnsvolatilityprice impacttrading volume |
| spellingShingle | Stephen L. Lenkey The market impact of leveraged ETFs: A Survey of the literature Quantitative Finance and Economics leveraged etfs late-day returns volatility price impact trading volume |
| title | The market impact of leveraged ETFs: A Survey of the literature |
| title_full | The market impact of leveraged ETFs: A Survey of the literature |
| title_fullStr | The market impact of leveraged ETFs: A Survey of the literature |
| title_full_unstemmed | The market impact of leveraged ETFs: A Survey of the literature |
| title_short | The market impact of leveraged ETFs: A Survey of the literature |
| title_sort | market impact of leveraged etfs a survey of the literature |
| topic | leveraged etfs late-day returns volatility price impact trading volume |
| url | https://www.aimspress.com/article/doi/10.3934/QFE.2024031 |
| work_keys_str_mv | AT stephenllenkey themarketimpactofleveragedetfsasurveyoftheliterature AT stephenllenkey marketimpactofleveragedetfsasurveyoftheliterature |