Levered Single-Stock ETFs

Hendrik Bessembinder

Research

58 Pages

Hendrik Bessembinder examines how constant leverage strategies behave over time, focusing on levered single stock exchange traded funds. The paper shows that compounding, volatility and return reversals drive a wedge between promised leverage and realized outcomes. Long levered single stock funds underperform simple benchmarks by about 0.8% per month on average.

Date published: July 28, 2025

Key Takeaways

Constant leverage concept: Defines strategies that maintain a fixed leverage ratio through frequent rebalancing of the underlying asset.
Volatility impact: Describes how volatile markets and mean reversion can erode compound returns for leveraged positions.
Friction effects: Highlights the role of fees, trading costs and financing spreads in further dragging performance.
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