Abstract

Many financial instruments are designed with embedded leverage, such as options and leveraged exchange-traded funds (ETFs). Embedded leverage alleviates investors’ leverage constraints, and, therefore, we hypothesize that embedded leverage lowers required returns. Consistent with this hypothesis, we find empirically that options and leveraged ETFs provide significant amounts of embedded leverage; this embedded leverage increases return volatility in proportion to the embedded leverage; and higher embedded leverage is associated with lower risk-adjusted returns. The results are statistically and economically significant, and we provide extensive robustness tests and discuss the broader implications of embedded leverage for financial economics. (JEL G02, G11, G12, G13, G14, G20)

中文翻译：

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嵌入式杠杆

摘要

许多金融工具都设计有嵌入式杠杆，例如期权和杠杆交易所交易基金 (ETF)。嵌入式杠杆减轻了投资者的杠杆约束，因此，我们假设嵌入式杠杆降低了所需的回报。与这一假设一致，我们从经验上发现期权和杠杆 ETF 提供了大量的嵌入式杠杆；这种嵌入杠杆增加了与嵌入杠杆成比例的回报波动；较高的嵌入杠杆与较低的风险调整回报相关。结果具有统计意义和经济意义，我们提供了广泛的稳健性测试，并讨论了嵌入式杠杆对金融经济学的更广泛影响。（杰尔G02、G11、G12、G13、G14、G20）