Abstract

http://ssrn.com/abstract=2161057
 
 

References (28)



 
 

Footnotes (17)



 


 



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

October 19, 2015


Abstract:     
Regulators and market participants are concerned about leveraged ETFs' role in driving up end-of-day volatility through hedging activities near the market's close. Leveraged ETF providers counter that the funds are too small to make a meaningful impact on volatility. For the period surrounding the financial crisis, 2006-2011, we show that end-of-day volatility was positively and statistically significantly correlated with the ratio of potential rebalancing trades to total trading volume. The impacts were not all economically significant, but largest during the most volatile days. Given the predictable pattern of leveraged ETF hedging demands, implications for predatory trading are explored.

Number of Pages in PDF File: 49

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

JEL Classification: G10


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Date posted: October 13, 2012 ; Last revised: January 7, 2016

Suggested Citation

Shum, Pauline M. and Hejazi, Walid and Haryanto, Edgar and Rodier, Arthur, Intraday Share Price Volatility and Leveraged ETF Rebalancing (October 19, 2015). 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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