Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
7364850 | Journal of International Financial Markets, Institutions and Money | 2014 | 45 Pages |
Abstract
This study examines the tracking performance of U.S.-traded International Leveraged Exchanged-traded Funds (ILETFs) that track the following markets: Brazil, China, Europe, Japan, and Mexico. We find that the beta and returns of these ILETFs can deviate dramatically from their naïve expected counterparts. We further develop a comprehensive framework that decomposes an ILETF's return deviation into misperception-related components and tracking error-related components. Our results suggest that daily investors in ILETFs should be mindful of their underexposure to the foreign markets and overexposure to the U.S. market, while longer-term investors should pay special attention to the negative compounding deviation during volatile markets.
Related Topics
Social Sciences and Humanities
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Economics and Econometrics
Authors
Hongfei Tang, Xiaoqing Eleanor Xu, Zihui Yang,