The Impact of Leveraged and Inverse ETFs on Underlying Real Estate Returns

Real Estate Economics, Forthcoming

Posted: 31 Dec 2013

See all articles by Qing Bai

Qing Bai

Dickinson College

Shaun Bond

Independent

Brian C. Hatch

University of Cincinnati - Department of Finance - Real Estate

Multiple version iconThere are 2 versions of this paper

Date Written: December 13, 2013

Abstract

Leveraged and inverse ETFs (LETFs) were introduced in 2006. By 2008 there was concern that the requirement of LETFs to rebalance near the close might have a significant impact on the prices of the stocks in the underlying indexes. We examine the impact of trading activity induced by six real estate-related LETFs on the late day price dynamics of 63 real estate sector stocks. Through a comparison of sample and control stocks and through a regression model of LETF rebalancing, we find that these LETFs significantly impact the prices of component stocks, increase their volatility, and contribute to price momentum.

Keywords: Leverage and Inverse exchange traded funds (ETFs), REITs, Financial Crisis, rebalancing demand

Suggested Citation

Bai, Qing and Bond, Shaun and Hatch, Brian C., The Impact of Leveraged and Inverse ETFs on Underlying Real Estate Returns (December 13, 2013). Real Estate Economics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2373357

Qing Bai

Dickinson College ( email )

Carlisle, PA 17013
United States

Brian C. Hatch

University of Cincinnati - Department of Finance - Real Estate ( email )

Carl H. Lindner Hall
P.O. Box 210195
Cincinnati, OH 45221
United States
513-556-7076 (Phone)
513-556-0979 (Fax)

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