A Levered ETF Anomaly Explained

2026/01/01 by Stephen W. Bianchi, Stephen Bianchi, Lisa R. Goldberg · 1 voice
Economics, Econometrics and Finance · #Anomaly (physics) #COVID-19 Pandemic Impacts #Compounding #Constant (computer programming) #Covariance #Financial Markets and Investment Strategies #Index (typography) #Leverage (statistics) #Leverage effect #Market Dynamics and Volatility #q-fin.PM

paper · pdf · doi:10.2139/ssrn.6576339

openalex publication_date 2026/01/01 · openalex created_date 2026/04/21 · arxiv published 2026/04/30 · arxiv updated 2026/04/30 · openalex updated_date 2026/07/14

Abstract

Counterintuitively, the S&P 500 Index rose between January 1, 2022, and December 29, 2023, while exchange-traded funds (ETFs) seeking to deliver 2x and 3x daily returns of the index delivered substantially negative returns. Roughly two-thirds of the difference between the returns of the index and the levered ETFs can be attributed to compounding and volatility. The remaining difference is explained by the covariance between the ETFs' deviations from constant leverage and the index's return.

Citations

• Diversification Returns and Asset Contributions

Discussions

• Stephen W. Bianchi, Lisa R. Goldberg: A Levered ETF Anomaly Explained https://arxiv.org/abs/2604.27287 https://arxiv.org/pdf/2604.27287 https://arxiv.org/html/2604.27287 [bsky, 0 points, 0 comments]

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