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The Long Term Behaviour of Leveraged ETFs [pdf]
- Bostonian 5y agoLeveraged ETFs tend to underperform what their beta would predict because they incur daily trading costs and because they buy when the market rises and sell when it falls, which is the wrong strategy when there is negative autocorrelation in returns (there is some). SPUU, a twice-leveraged S&P 500 fund, has had an annualized alpha of about -5% over its lifetime, according to Portfolio Visualizer: https://www.portfoliovisualizer.com/factor-analysis?s=y®ressionType=1&symbols=SPUU&sharedTimePeriod=true&factorDataSet=-1&marketArea=0&factorModel=3&useHMLDevFactor=false&includeQualityFactor=false&includeLowBetaFactor=false&fixedIncomeFactorModel=0&__checkbox_ffmkt=true&__checkbox_ffsmb=true&__checkbox_ffsmb5=true&__checkbox_ffhml=true&__checkbox_ffmom=true&__checkbox_ffrmw=true&__checkbox_ffcma=true&__checkbox_ffstrev=true&__checkbox_ffltrev=true&__checkbox_aqrmkt=true&__checkbox_aqrsmb=true&__checkbox_aqrhml=true&__checkbox_aqrhmldev=true&__checkbox_aqrmom=true&__checkbox_aqrqmj=true&__checkbox_aqrbab=true&__checkbox_aamkt=true&__checkbox_aasmb=true&__checkbox_aahml=true&__checkbox_aamom=true&__checkbox_aaqmj=true&__checkbox_qmkt=true&__checkbox_qme=true&__checkbox_qia=true&__checkbox_qroe=true&__checkbox_qeg=true&__checkbox_trm=true&__checkbox_cdt=true&customFactors=VOO&timePeriod=2&rollPeriod=36&marketAssetType=1&robustRegression=false https://www.portfoliovisualizer.com/factor-analysis?s=y®r...