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arXiv · 2611.01392

The Costs and Benefits of Leveraged ETFs

Chris Murray·Marco Sammon
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Abstract

We study the costs and benefits of leveraged ETFs (LETFs), focusing on five determinants of performance: volatility drag, fees, financing costs, product launches, and market timing. Long broad-equity-index LETFs generated more than 100 billion US dollars in investor gains, including over 40 billion US dollars relative to counterfactual investments in the underlying assets, due to modest structural headwinds and rising markets. Single-stock LETFs, however, are launched on stocks near the top of the volatility and past-return distributions. This caters to retail demand for lottery-like payoffs, but it also creates larger volatility drag, higher financing costs, and greater exposure to losses from poor market timing.

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Chris Murray, Marco Sammon. 2026-11-03. The Costs and Benefits of Leveraged ETFs. https://arxiv.org/abs/2611.01392

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