Leveraged Investment Products: Monthly Rebalancing Boosts Performance, but Tail Risk Looms

  title={Leveraged Investment Products: Monthly Rebalancing Boosts Performance, but Tail Risk Looms},
  author={Matthew S. Crouse},
  booktitle={The Journal of Index Investing},
  • M. Crouse
  • Published in
    The Journal of Index…
    10 October 2019
  • Economics
Volatility reduces any investment’s compound rate of return in what is termed volatility drag, a drawback of leveraged investment products (LIPs). In recent years “Version 2.0” LIPs that reset leverage monthly (monthly LIPs) have been created to lessen the impact of drag. We show that monthly LIPs improve returns because markets are less volatile on a monthly timescale. Nevertheless, monthly LIPs remain problematic as buy-and-hold investments because of the risks of large drawdowns and… 
2 Citations



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