THE PRICING EFFICIENCY OF LEVERAGED EXCHANGE‐TRADED FUNDS: EVIDENCE FROM THE U.S. MARKETS

Abstract We examine the pricing efficiency of leveraged exchange‐traded funds, whose goal is to generate daily returns that are in a positive or a negative multiple of the underlying index returns. We find that bull funds (i.e., those with positive multiples) tend to trade at a discount more often than bear funds (i.e., those with negative multiples) do. Also, price deviations of bull (bear) funds are negatively (positively) correlated with …