Economics at your fingertips  

Synthetic Leverage and Fund Risk-Taking

Daniel Fricke ()

No 126, ESRB Working Paper Series from European Systemic Risk Board

Abstract: Mutual fund risk-taking via active portfolio rebalancing varies both in the cross-section and over time. In this paper, I show that the same is true for funds’ off-balance sheet risk-taking, even after controlling for on-balance sheet activities. For this purpose, I propose a novel measure of synthetic leverage, which can be estimated based on publicly available information. In the empirical application, I show that German equity funds have increased their risk-taking via synthetic leverage from mid-2015 up until early 2019. In the cross-section, I find that synthetically leveraged funds tend to underperform and display higher levels of fragility. JEL Classification: G11, G23, E44

Keywords: derivatives; leverage; mutual funds; risk-taking; securities lending (search for similar items in EconPapers)
Date: 2021-09
New Economics Papers: this item is included in nep-cwa, nep-isf and nep-rmg
References: View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link) (application/pdf)

Related works:
Working Paper: Synthetic leverage and fund risk-taking (2021) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this paper

More papers in ESRB Working Paper Series from European Systemic Risk Board 60640 Frankfurt am Main, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Official Publications ().

Page updated 2022-12-04
Handle: RePEc:srk:srkwps:2021126