Search found 8 matches

by random_person
Thu Feb 07, 2019 7:31 pm
Forum: Investing - Theory, News & General
Topic: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]
Replies: 3353
Views: 330995

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

Had anyone looked into shorting the inverse 3x leveraged funds in the same percentage? The first thing to note is that there is a cost to borrow the ETFs, but Interactive Brokers posts the daily prices online so you can see how much it costs (no historical data that I'm aware of). Here is the link:...
by random_person
Thu Feb 07, 2019 4:51 pm
Forum: Investing - Theory, News & General
Topic: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]
Replies: 3353
Views: 330995

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

I think someone should do this test: during the time period in which 3X leveraged ETFs existed, compare the performance of the simulated 3X leveraged ETF to the actual 3X leveraged ETF. Let's see if the simulated data are anywhere close to the actual results.
by random_person
Thu Feb 07, 2019 4:19 pm
Forum: Investing - Theory, News & General
Topic: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]
Replies: 3353
Views: 330995

Re: HEDGEFUNDIE's excellent adventure [3x leveraged ETF strategy]

vineviz wrote:
Thu Feb 07, 2019 3:15 pm
random_person wrote:
Thu Feb 07, 2019 2:45 pm
That is the definition of mean reversion.
That might be what you think mean reversion means, but I challenge you to provide a source that agrees with you.
https://www.investopedia.com/terms/m/meanreversion.asp

First link on google.
by random_person
Thu Feb 07, 2019 3:05 pm
Forum: Investing - Theory, News & General
Topic: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]
Replies: 3353
Views: 330995

Re: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]

I have one piece of practical advise for those considering this strategy. There is a very strong demand for shorting these ETFs on different brokerages. Depending on which brokerage you use, you can get a percentage of the fees the broker earns for lending out your shares. For example, Interactive B...
by random_person
Thu Feb 07, 2019 2:45 pm
Forum: Investing - Theory, News & General
Topic: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]
Replies: 3353
Views: 330995

Re: HEDGEFUNDIE's excellent adventure [3x leveraged ETF strategy]

Volatility decay exists under a specific set of conditions, which can be (simplistically) summarized as a period in which the mean return is near zero and the variance of returns is NOT near zero. That's it. That is the definition of mean reversion. Anyway, I really would like to see 2008 and 2017 ...
by random_person
Thu Feb 07, 2019 1:14 pm
Forum: Investing - Theory, News & General
Topic: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]
Replies: 3353
Views: 330995

Re: HEDGEFUNDIE's excellent adventure [3x leveraged ETF strategy]

I think you misunderstand what "volatility decay" actually means. It doesn't mean that "variance itself causes the ETF to underperform". I've never seen anyone use the term to mean that except you. The results that you are observing demonstrate that the underlying data is mean reverting over the ti...
by random_person
Thu Feb 07, 2019 11:42 am
Forum: Investing - Theory, News & General
Topic: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]
Replies: 3353
Views: 330995

Re: HEDGEFUNDIE's excellent adventure [3x leveraged ETF strategy]

1. "Volatility decay" is not a thing "Volatility decay" refers to the circumstances in which the returns of a daily leveraged fund differ materially over some period of time from the returns of the underlying index multiplied by the leverage factor. This isn't true for a couple reasons. But first y...
by random_person
Wed Feb 06, 2019 10:39 pm
Forum: Investing - Theory, News & General
Topic: HEDGEFUNDIE's excellent adventure [risk parity strategy using 3x leveraged ETFs]
Replies: 3353
Views: 330995

Re: HEDGEFUNDIE's excellent adventure [3x leveraged ETF strategy]

I spent a lot of time thinking about leveraged ETFs in recent years. I came to two main conclusions: 1. "Volatility decay" is not a thing 2. Leveraged ETFs under perform their benchmarks in the data and this is because of trading costs from rebalancing So for the first point, many people against lev...