DO LEVERAGED/INVERSE ETFS WAG THE UNDERLYING MARKET?: EVIDENCE FROM THE KOREAN STOCK MARKET

Kyuseok Lee and Soo-Hyun Kim

Hitotsubashi Journal of Economics, 2018, vol. 59, issue 2, 83-94

Abstract: This paper addresses the question of whether leveraged and inverse exchange-traded funds (ETFs) affect the underlying market. The Korean markets provide a unique context to address the question in that (i) the ETFs contain only stocks and futures, and (ii) the futures markets close 15 minutes later than the stock markets. Although the Hasbrouck information shares do not indicate any dominant price discovery effect between the leveraged/inverse ETFs and the underlying stock market based on daily close-to-close returns, we find evidence that ETF managersʼ rebalancing activities have a significant impact on the daily close-to-open returns of the underlying stock market.

Keywords: ETF; price discovery; information share; market impact (search for similar items in EconPapers)
JEL-codes: G12 G14 G15 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:hit:hitjec:v:59:y:2018:i:2:p:83-94

DOI: 10.15057/29713

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