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Contribution Details

Type Master's Thesis
Scope Discipline-based scholarship
Title Should investors use leveraged ETFs to obtain leverage?
Organization Unit
  • Gabriel Tobler
  • Alexandre Ziegler
  • Thorsten Hens
  • English
Institution University of Zurich
Faculty Faculty of Business, Economics and Informatics
Number of Pages 50
Date June 2019
Zusammenfassung Leveraged exchange traded funds, henceforth LETFs, have become a popular instrument for short-term hedging and an option for retail investors to achieve significant exposure. This thesis explains and highlights two different options to achieve leverage for retail investors. The data basis includes 8 ETF quadruplets from 2008 until 2018. Tracking errors are found to be insignificant and long-term performances show little deviation from a theoretically leveraged position in low volatility environments. High margin costs, low returns and standard deviations, and longer holding periods increase the viability of long-term LETF portfolio holdings. The proposed alternative trading system failed to achieve absolute returns but showed beneficial risk-return characteristics. Nevertheless, LETFs may be a suitable alternative for retail investors to achieve desired leverage without using derivatives.
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