DOES LEVERAGE PAY OFF? THE CASE OF EQUITY-LEVERAGED MUTUAL FUNDS
Abstract
In this study we examine the risk-adjusted performance of a sample of U.S.-based enhanced index mutual funds that use leverage with the goal of generating return-multiples of its benchmark. We study equity-leverage funds that follow four major market indices, that is the Dow Jones Industrial Average (Dow), the NASDAQ-100, the Russell 2000 and the Standard and Poor's 500. We consider two model specifications and different market conditions. The evidence shows that these funds fail to outperform. This is particularly true during Bull markets.
Downloads
Copyright (c) 2023 Javier Rodriguez, Herminio Romero
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
Authors submitting articles for publication warrant that the work is not an infringement of any existing copyright and will indemnify the publisher against any breach of such warranty. By publishing in Applied Finance Letters, the author(s) retain copyright but agree to the dissemination of their work through Applied Finance Letters.
By publishing in Applied Finance Letters, the authors grant the Journal a Creative Commons nonexclusive worldwide license (CC-BY-NC-ND: Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License) for electronic dissemination of the article via the Internet, and, a nonexclusive right to license others to reproduce, republish, transmit, and distribute the content of the journal. The authors grant the Journal the right to transfer content (without changing it), to any medium or format necessary for the purpose of preservation.
Authors agree that the Journal will not be liable for any damages, costs, or losses whatsoever arising in any circumstances from its services, including damages arising from the breakdown of technology and difficulties with access.
