Securities Litigation and Consulting Group, Inc. (“SLCG”) has issued an investment management study into leveraged and inverse exchange traded funds (“ETFs”), “Leveraged ETFs, Holding Periods and Investment Shortfalls”. The report’s primary authors are Ilan Guedj, Guohua Li and Craig McCann. Dr. McCann and Dr. Guedj are Principals of SLCG and Dr. Li is a Senior Financial Economist. Dr. McCann and Dr. Guedj are former university professors. Dr. McCann is a former Securities and Exchange Commission economist.
The SLCG study explains that investors who hold leveraged and inverse ETFs for periods longer than a day expose themselves to substantial risk that the holding period returns will deviate from the returns to a leveraged or inverse investment in the index. The study reports estimated distributions of holding periods for investors in actual leveraged and inverse ETFs using standard stock trading models found in the literature.
The report estimates the investment shortfall incurred by investors who hold leveraged and inverse compared to investing in a simple margin account to generate the same leveraged or short investment strategy to be as much as 3% of their investment in less than 3 weeks, an annualized cost of 50%. The study also discusses the viability of leveraged and inverse leveraged ETFs that rebalance less often than daily and calculate their costs to investors. This study and other working papers are available at http://www.slcg.com/research.php.
Securities Litigation and Consulting Group, Inc. (“SLCG”) is a financial economics consulting firm based in the Virginia suburbs outside of Washington, DC. SLCG provides consulting services and expert witnesses to law firms, publicly-traded corporations, banks, brokerage firms and individuals involved in complex litigation throughout the United States. SLCG’s staff includes PhD, MA and BA level professionals with academic, industry and government experience. Its experts have testified in state and federal court and in various arbitration forums.
For further information about SLCG or its research, please contact Dr. Guedj at 703-865-4020 and [email protected], Dr. Li at [email protected] and 703-890-0740 or Dr. McCann at 703-246-9381 and [email protected] or visit us at http://www.slcg.com.
SOURCE Securities Litigation and Consulting Group, Inc.