Have leveraged and traditional ETFs impacted the volatility of real estate stock prices?

Curcio, Richard J.; Anderson, Randy I.; Guirguis, Hany; Boney, Vaneesha

doi:10.1080/09603107.2011.624080

Cited by 26 publications

(6 citation statements)

References 18 publications

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“…Curcio et al [15] revealed that real estate ETFs affected the volatility of their underlying real estate stocks. The evidence showed a significant increase in the volatility of their component real estate ETFs.…”

Section: Literature Reviewmentioning

confidence: 99%

Testing Leverage and Spillover Effects in Precious Metal ETFs

Chen¹,

Trang²

2018

TEL

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This research employed the Generalized Autoregressive Conditional Heteroskedasticity-in-Mean-Autoregressive Moving Average (GARCH-M-ARMA) and the Exponentially Generalized Autoregressive Conditional Heteroskedasticity-in-Mean-Autoregressive Moving Average (EGARCH-M-ARMA) models to investigate the spillover and leverage effects in the returns and volatilities of precious metal (base metal) ETFs. Significant positive relationships were found between precious metal (base metal) ETFs and precious metal (base metal) price indices. Further, the positive relationship between risk and return was illustrated in daily precious metal (base metal) ETFs.

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Section: Literature Reviewmentioning

confidence: 99%

Testing Leverage and Spillover Effects in Precious Metal ETFs

Chen¹,

Trang²

2018

TEL

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“…positive and not negative. This means that in spite of the costs of active management, financing costs and volatility decay, management contributed to the fund's returns in this period 7 .…”

Section: Haga and Lindset (2012) Study Norwegian ±2xmentioning

confidence: 99%

“…Firstly, these funds allow small investors to perform hedge fund-like strategies without the need of expensive margin accounts or using derivatives, but with the ease of trading common stocks. In theory, a private investor can achieve ±2 and ±3 times the return of an index on his own by using derivatives, borrowing or short selling; yet, such transactions are, in practice, complicated and require knowledge, skill, time and expertise (Curcio et al, 2012). In spite of the high expense ratios that leveraged ETFs have compared to 1x funds, they are usually less expensive to use than other forms of margin.…”

Section: Introductionmentioning

confidence: 99%

Assessing the performance of American and European Leveraged Exchange Traded Funds

Tsalikis

Papadopoulos

2018

Investment Management and Financial Innovations

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Leveraged Exchange Traded Funds (ETFs) (LETFs) are a recent and highly successful financial innovation; yet, investors and several studies criticized them for not performing as advertised, especially in the long term. Τhis paper discusses their unique characteristics and their path-dependent price dynamics, which may result in unexpected returns. Furthermore, the authors evaluate the performance of a large sample of European and American leveraged ETFs since each fund’s inception and show that they perform as intended for daily holding periods. Leveraged ETFs are also successful in delivering the promised performance over holding periods of up to one week, their performance starts to deviate when the holding period increases to one month. Empirical evidence suggests that bear (short) ETFs deviate from their target return more quickly than their bull (long) counterparts as the holding period lengthens. A possible explanation for this is that transaction costs, which are related to daily re-balancing activity, are higher for bear funds. When comparing the daily performance of European vs American funds, the authors find them both to be equally efficient in replicating their benchmarks, although European leveraged ETFs are much smaller in their Assets Under Management (AUM) compared to US LETFs.

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“…Curcio et al . () examine the impact of the initiation of traditional and leveraged ETFs on interday volatility of real estate stocks. Using 64 days of daily data before and after the initiation of ETF trading, they find that the volatility of underlying real estate stocks increased with the largest change around the initiation of ProShares real estate‐related LETFs (URE, SRS, UYG and SKF) and traditional ETFs (IYR and IYF).…”

Section: Related Literaturementioning

confidence: 99%

The Impact of Leveraged and Inverse ETFs on Underlying Real Estate Returns

Bai

Bond

Hatch

2014

Real Estate Economics

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Leveraged and inverse ETFs (LETFs) were introduced in 2006. By 2008 there was concern that the requirement of LETFs to rebalance near the close might have a significant impact on the prices of the stocks in the underlying indexes. We examine the impact of trading activity induced by six real estate-related LETFs on the late-day price dynamics of 63 real estate sector stocks. Through a comparison of sample and control stocks and through a regression model of LETF rebalancing, we find that these LETFs significantly impact the prices of component stocks, increase their volatility and contribute to price momentum.

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Have leveraged and traditional ETFs impacted the volatility of real estate stock prices?

Cited by 26 publications

References 18 publications

Testing Leverage and Spillover Effects in Precious Metal ETFs

Testing Leverage and Spillover Effects in Precious Metal ETFs

Assessing the performance of American and European Leveraged Exchange Traded Funds

The Impact of Leveraged and Inverse ETFs on Underlying Real Estate Returns

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