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Spillover and Asymmetric-volatility Effects of Leveraged and Inverse Leveraged Exchange Traded Funds
| Content Provider | Semantic Scholar |
|---|---|
| Author | Chen, Jing Diaz, John Francis T. |
| Copyright Year | 2012 |
| Abstract | This paper studies the spillover of returns and volatilities of leveraged exchange-traded funds (ETFs) using the Exponential General Autoregressive Conditional Heteroskedasticity-in-Mean-Autoregressive Moving Average (EGARCH-M-ARMA) model. This research finds the strong positive (negative) influence of lagged leverage (inverse leveraged) ETF returns on current stock index returns. Lagged stock index returns have negative (positive) effect on leveraged (inverse leveraged) ETF returns as a result of the addition (reduction) of total return swaps exposure. A negative bilateral relationship is evident in the spillover effects of returns. Moreover, a bilateral relationship of spillover effects of volatilities is observed from the results. The findings provide evidence of the higher volatility caused by leveraged ETFs. The relationship between risks and returns is negative for both the stock index and the inverse leveraged ETF returns, whereas the positive relationship for leveraged ETFs has minor significance. |
| File Format | PDF HTM / HTML |
| Alternate Webpage(s) | http://www.jbprpapers.com/uploads/2012/September/1361822795_Jo-Hui.pdf |
| Language | English |
| Access Restriction | Open |
| Content Type | Text |
| Resource Type | Article |
