An Investigation of Tracking Errors of Leveraged and Inverse Etfs in Taiwan

Global Journal of Business Research, V . 13 (1) P. 15-22, 2019

8 Pages Posted: 19 Jul 2019

See all articles by Han-Ching Huang

Han-Ching Huang

Chung Yuan Christian University

Lin Jiun Tsai

Chung Chung Yuan Christian University

Date Written: 2019

Abstract

The purpose of this paper is to investigate the tracking error of leveraged and inverse ETFs. Single-day tracking performances of the Taiwan 50 Bull 2X ETF and Taiwan 50 Bear -1X ETF were tested to investigate whether there are structural changes of tracking performances during the bull and bear markets. The result shows that single-day performances of the two ETFs are significantly different from their targets. The positive and negative effects of single-day performance are asymmetric. When the market moves from bull to bear, there is a structural change in the two ETFs’ returns. Nonetheless, there is a structural change only in Taiwan 50 Bear -1X ETF returns when the market moves from bear to bull.

Keywords: Tracking Error, Leveraged ETF, Inverse ETF, Structural Change

JEL Classification: G11, G12

Suggested Citation

Huang, Han-Ching and Tsai, Lin Jiun, An Investigation of Tracking Errors of Leveraged and Inverse Etfs in Taiwan (2019). Global Journal of Business Research, V . 13 (1) P. 15-22, 2019, Available at SSRN: https://ssrn.com/abstract=3408194

Han-Ching Huang (Contact Author)

Chung Yuan Christian University ( email )

22 Pu-Jen, Pu-chung Li
Chung-Li, 32023
Taiwan

Lin Jiun Tsai

Chung Chung Yuan Christian University ( email )

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