RT Journal Article
SR Electronic
T1 Stock Price Volatility of Banks and Other Financials
Emanating from the Inception of
Leveraged, Inverse, and Traditional ETFs
JF The Journal of Index Investing
FD Institutional Investor Journals
SP 12
OP 31
DO 10.3905/jii.2014.5.1.012
VO 5
IS 1
A1 Richard J. Curcio
A1 Randy I. Anderson
A1 Hany Guirguis
YR 2014
UL https://pm-research.com/content/5/1/12.abstract
AB Changes in stock price volatility of banks and other financials resulting from the inception of the first-ever, leveraged, inverse and traditional, purely financial exchange-traded funds (ETFs) are investigated. Financials have become much more accessible to investors through these creative and increasingly popular ETF securities. Results from using a constant-variance, first-order, Markov regime-switching model show a significant increase in the volatility of banks and other financials following the introduction of XLF, the traditional ETF representing the Financial Select Sector SPDR, and the leveraged (long and inverse) ETFs, UYG and SKF, benchmarked to the Dow Jones U.S. Financials Index. Volatility emanating from the inception of the leveraged ETFs was several orders of magnitude greater than that of the traditional ETF. Banking and large-cap financials were most prominently affected by the XLF. All sectors and size categories of financial firms were significantly impacted by UYG and SKF, the leveraged ETFs.TOPICS: Exchange-traded funds and applications, fundamental equity analysis, volatility measures