RT Journal Article
SR Electronic
T1 Same Leverage, Less Volatility: <em>An Alternative Approach to the Construction of Leveraged Funds</em>
JF The Journal of Index Investing
FD Institutional Investor Journals
SP 75
OP 94
DO 10.3905/jii.2016.7.3.075
VO 7
IS 3
A1 Valmira Hoxhaj
A1 Ravindra Khattree
YR 2016
UL https://pm-research.com/content/7/3/75.abstract
AB This article introduces the concept of variable leverage for exchange-traded funds while keeping in mind that the target value for the leverage value is still fixed. This is done to ensure that the daily percentage hedging demand is kept constant, which in turn provides some assurance to investors that excessive buying and selling will not take place. By using simulations, the authors show that this newly constructed leveraged fund is better behaved than the usual constant multiple leveraged fund in terms of standard deviations and volatility of compounded returns.TOPICS: Exchange-traded funds and applications, portfolio construction, simulations