Date of Award

2012

Degree Type

Thesis

Degree Name

Master of Science (MS)

Department

Economics and Finance

Abstract

This study provides an empirical analysis to determine whether leveraged exchange-traded funds are contributing to excess intraday volatility. The study, which is centered aroudn the introduction dates of six leveraged ETFs, uses high-frequency TAQ data for the S&P 500 constituent stocks to compare volatility before and after the introduction dates. Realized volatility is calculated for the morning, afternoon, and entire trading day during the twenty trading days before, and twenty trading days after each date of interest. There has been a lot of debate recently about whether leveraged ETFs could be increasing swings in intraday volatility. Up until now, this debate has persisted almost exclusively among practitioners and professionals. This study is the first in-depth, academic approach to the problem. Making use of the rich TAQ database to measure intraday volatility round the event days, some suspicions are confiremed while others are not.

Comments

This work made publicly available electronically on October 30, 2012.

Included in

Finance Commons

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