Monthly-rebalanced leveraged exchange-traded products: Performance and mandatory rebalancing needs

Huang, Yizhao; Chen, Haoran

doi:10.1016/j.najef.2021.101431

The North American Journal of Economics and Finance

2021

DOI: 10.1016/j.najef.2021.101431

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Monthly-rebalanced leveraged exchange-traded products: Performance and mandatory rebalancing needs

Yizhao Huang

Haoran Chen

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“…There are some LETFs, or LETPs more generally, rebalanced in a non-daily frequency, such as monthly-rebalanced LETPs, quarterly-rebalanced LETPs, etc. See[4] [22] [23] and[24] for more details about monthly rebalanced LETPs.…”

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How Would Leveraged Exchange-Traded Funds Perform in Chinese A-Share Market?

Huang¹,

Tang²

2022

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This paper examines the performance of Leveraged Exchange-Traded Funds (LETFs) on Chinese A-share indices. We find that bull funds deliver positive average returns and that both the bull and bear Chinese LETFs on average (but less often) exceed the naively expected returns over multiple holding days. Compared to the LETFs on the equity indices of the United States, Chinese bull funds have higher returns over short holding periods, but not over long holding periods. During financial crises, Chinese LETFs suffer more erosion than in normal time and bear funds likely experience positive returns. Lastly, we derive a model to guide investors on when LETFs are likely to perform better or worse than naïve expectations. We not only reveal the potential performance of Chinese LETFs to market participants and regulators for the first time, but also expand the existing LETF literature by documenting new evidence from the unique A-share market.

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How Would Leveraged Exchange-Traded Funds Perform in Chinese A-Share Market?

Huang¹,

Tang²

2022

JMF

Self Cite

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Monthly-rebalanced leveraged exchange-traded products: Performance and mandatory rebalancing needs

Cited by 1 publication

References 29 publications

How Would Leveraged Exchange-Traded Funds Perform in Chinese A-Share Market?

How Would Leveraged Exchange-Traded Funds Perform in Chinese A-Share Market?

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