We present a general equilibrium model in which heterogeneous investors choose among bonds, stocks, and an Index Fund holding the market portfolio. We show that, under standard assumptions, an equilibrium exists. We then derive predictions for equilibrium asset prices, investor behavior, and...

This study evaluates whether exchange traded funds (ETFs) threaten fnancial market stability by testing two hypotheses relating the growing importance of ETFs to increased market volatility and rising equity valuations. We estimate quantile cointegration models using Standard & Poor's 500 Index...

In recent years, exchange-traded fund (ETF) markets have grown exponentially due to their rising popularity amongst retail investors with a preference for passive investments. However, the effect of this rising popularity on the performance of ETF markets remains understudied. Therefore, the...

One year after Coronovirus and three years later after initially suggesting them, we revisit the performance of balanced portfolios of leveraged ETFs that we initially suggested in the 2017 paper. Leveraged ETFs provide a convenient mechanism to dynamically change portfolio exposure and can be...

The popularity of passive investing through index mutual funds and exchange-traded funds (ETFs) has grown substantially over recent years, displacing higher-cost active investment styles. A shift towards passive investing could affect securities markets in two key ways. First, it could result in...

Leveraged ETFs provide a convenient mechanism to dynamically change portfolio exposure. A classical portfolio insurance strategy of Black-Jones-Perold can be easily implemented with leveraged ETFs. More complex dynamic portfolio strategies that also can be implemented using leveraged ETFs. We...

We find that hedge funds’ ETF option positions predict cross-sectional differences in the future volatility of underlying ETFs. The predictive power is strongest for straddle positions and non-equity ETFs. A tracking portfolio of straddles based on funds’ straddle positions earns quarterly...

We discuss how to build ETF risk models. Our approach anchors on i) first building a multilevel (non-)binary classification/taxonomy for ETFs, which is utilized in order to define the risk factors, and ii) then building the risk models based on these risk factors by utilizing the heterotic risk...