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Understanding bull and bear ETFs

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  • Raymond Haga
  • Snorre Lindset

Abstract

This paper analyzes leveraged exchange-traded funds (ETFs) with a particular focus on some of the early Norwegian ETFs. The funds use the futures markets to provide investors with 2 and−2 times the daily returns on the OBX index. First, we found that positive risk-free interest rates make the fund returns deviate from what is pictured by the providers. Secondly, we found that volatility can harm the investor returns. Thirdly, we found that the funds have fallen somewhat short of providing the pictured returns. Finally, we found that the positions taken in the futures markets are too small to obtain the pictured returns.

Suggested Citation

  • Raymond Haga & Snorre Lindset, 2012. "Understanding bull and bear ETFs," The European Journal of Finance, Taylor & Francis Journals, vol. 18(2), pages 149-165, February.
    • Handle: RePEc:taf:eurjfi:v:18:y:2012:i:2:p:149-165
    DOI: 10.1080/1351847X.2011.574980
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    Cited by:

    1. S. Narend & M. Thenmozhi, 2016. "What drives fund flows to index ETFs and mutual funds? A panel analysis of funds in India," DECISION: Official Journal of the Indian Institute of Management Calcutta, Springer;Indian Institute of Management Calcutta, vol. 43(1), pages 17-30, March.
    2. Joakim Kvamvold & Snorre Lindset, 2017. "Index trading and portfolio risk," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 41(1), pages 78-99, January.

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