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
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: Suggested Citation