Abstract

http://ssrn.com/abstract=2161057
 
 

References (28)



 
 

Citations (2)



 
 

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Intraday Share Price Volatility and Leveraged ETF Rebalancing


Pauline M. Shum


York University - Schulich School of Business

Walid Hejazi


University of Toronto - Rotman School of Management

Edgar Haryanto


Independent

Arthur Rodier


Independent

March 18, 2014


Abstract:     
Regulators and market participants are concerned about leveraged ETFs' role in driving up end-of-day volatility through their daily hedging activities. Leveraged ETF providers and analysts counter that the funds' net asset values are too small for the rebalancing trades to make a meaningful impact on market volatility. Using a variety of measures for the period 2006 to 2011, we show that the impact was positively correlated with the ratio of potential rebalancing trades to total trading volume at the end of the trading session. While these effects were statistically significant, they were economically significant only during days with the highest expected rebalancing volume. Given the predictable pattern of leveraged ETF hedging demands, we also explore the implications for predatory trading.

Number of Pages in PDF File: 49

Keywords: Leveraged ETF, ETF, Intraday volatility, Swap counterparties, market volatility, market microstructure

JEL Classification: G10

working papers series


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Date posted: October 13, 2012 ; Last revised: May 16, 2014

Suggested Citation

Shum, Pauline M. and Hejazi, Walid and Haryanto, Edgar and Rodier, Arthur, Intraday Share Price Volatility and Leveraged ETF Rebalancing (March 18, 2014). Available at SSRN: http://ssrn.com/abstract=2161057 or http://dx.doi.org/10.2139/ssrn.2161057

Contact Information

Pauline Shum (Contact Author)
York University - Schulich School of Business ( email )
4700 Keele Street
Toronto, Ontario M3J 1P3
Canada
Walid Hejazi
University of Toronto - Rotman School of Management ( email )
105 St. George Street
Toronto, Ontario M5S 3E6
Canada
(416) 287-7318 (Phone)
Edgar Haryanto
Independent
No Address Available
Arthur Rodier
Independent
No Address Available
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References:  28
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