How appropriate are leveraged ETFs for long-term investments?

Business & Finance, Finance & Investing, Finance
Cover of the book How appropriate are leveraged ETFs for long-term investments? by Dennis Hummel, GRIN Verlag
View on Amazon View on AbeBooks View on Kobo View on B.Depository View on eBay View on Walmart
Author: Dennis Hummel ISBN: 9783656912972
Publisher: GRIN Verlag Publication: March 5, 2015
Imprint: GRIN Verlag Language: English
Author: Dennis Hummel
ISBN: 9783656912972
Publisher: GRIN Verlag
Publication: March 5, 2015
Imprint: GRIN Verlag
Language: English

Bachelor Thesis from the year 2013 in the subject Business economics - Investment and Finance, grade: 2,7, University of Mannheim (Area Banking, Finance, and Insurance), language: English, abstract: Leveraged exchange-traded funds (LETFs) track the development of an underlying index with a certain multiplier. For compounding and non-compounding effects this is only guaranteed on a daily basis which raises concerns about their performance in the long run. After analyzing the LETF market in Germany, I ran a Monte-Carlo simulation of three multipliers across five different holding periods (one week to 4 years) to estimate the tracking error and I found that the multipliers deviate substantially for holding periods longer than one month. Using the rebalancing method with a 5% trigger proposed by other researchers, I was able to reduce the tracking error to negligible levels. In a nutshell, a buy-and-hold strategy using LETFs does not guarantee the multiplier in the long run and I recommend to invest directly in the index to participate from long-term stock market growth.

View on Amazon View on AbeBooks View on Kobo View on B.Depository View on eBay View on Walmart

Bachelor Thesis from the year 2013 in the subject Business economics - Investment and Finance, grade: 2,7, University of Mannheim (Area Banking, Finance, and Insurance), language: English, abstract: Leveraged exchange-traded funds (LETFs) track the development of an underlying index with a certain multiplier. For compounding and non-compounding effects this is only guaranteed on a daily basis which raises concerns about their performance in the long run. After analyzing the LETF market in Germany, I ran a Monte-Carlo simulation of three multipliers across five different holding periods (one week to 4 years) to estimate the tracking error and I found that the multipliers deviate substantially for holding periods longer than one month. Using the rebalancing method with a 5% trigger proposed by other researchers, I was able to reduce the tracking error to negligible levels. In a nutshell, a buy-and-hold strategy using LETFs does not guarantee the multiplier in the long run and I recommend to invest directly in the index to participate from long-term stock market growth.

More books from GRIN Verlag

Cover of the book Simon Magus: Gaukler, Erzketzer und Religionsstifter? by Dennis Hummel
Cover of the book Burn Out bei Lehrern by Dennis Hummel
Cover of the book Organisationen in der Krise by Dennis Hummel
Cover of the book Darstellung des Gemeinsinns in Kants 'Kritik der Urteilskraft' by Dennis Hummel
Cover of the book Die bilanzielle Abbildung von variablen Anschaffungskosten der Beteiligung nach IFRS 3 ( rev. 2008) by Dennis Hummel
Cover of the book Group Decision Support Systems by Dennis Hummel
Cover of the book 'User Generated Content'. Bedrohung oder Chance für Medienunternehmen? by Dennis Hummel
Cover of the book Zeitmanagement beim Lernen mit Lösungsbeispielen - Eine kleine Forschungsarbeit by Dennis Hummel
Cover of the book Fußballorientiertes Kindertraining im Alter von 4 bis 7 by Dennis Hummel
Cover of the book Schwarztouristik als Konkurrenz für kommerzielle Veranstalter by Dennis Hummel
Cover of the book Grundlagentexte der Cultural Studies im Macht-Wissens-Kontext by Dennis Hummel
Cover of the book Urbanites and the ideology of home: Engaging with a sociocultural issue in Nigerian Cities by Dennis Hummel
Cover of the book Faszination Lernen. Die Rolle der Spiegelneuronen by Dennis Hummel
Cover of the book Motorische Fähigkeiten und Defizite bei Grundschulkindern im Sportunterricht by Dennis Hummel
Cover of the book Die Geschichte der Erwachsenenbildung by Dennis Hummel
We use our own "cookies" and third party cookies to improve services and to see statistical information. By using this website, you agree to our Privacy Policy