Understanding bull and bear ETFs

Raymond Haga and Snorre Lindset

The European Journal of Finance, 2012, vol. 18, issue 2, 149-165

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.

Date: 2012
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DOI: 10.1080/1351847X.2011.574980

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