The Leveraged Inefficiency in Trending & Choppy Markets
Journal Title: Asian Journal of Economics, Business and Accounting - Year 2017, Vol 5, Issue 3
Abstract
The principal target of this article is to define, initially, a new trading methodology based on the innovative term “Leveraged Inefficiency”, and then to discuss the dimensions, functionalities, and trading returns of this inefficiency (market anomaly). In trading strategies the temporal (time-series) volatility is not well defined as far as the leverage instruments (like 3x ETFs) is concern. The proposed term could be characterized as a concept described by a 3-d array with a number of trading functionalities, because it uses (in market Entry and market Exit tactics) as its third temporal dimension the Jesse Livermore’s “Psychological Time” and the well-known in trading “Emotional Control” and the “Money Risk Management” as the other two dimensions. After back-testing the proposed trading methodology in available 3-year data for the JDST leveraged ETF (gold miners juniors), we found that in choppy markets, overnight-position institutions profit from the proposed “Leveraged Inefficiency” at the expense of long-term investors, and swing traders as well. Similarly, in trending markets, day-trading speculators profit from the proposed “Leveraged Inefficiency” at the expense of hedge-funds. Hence, the presented research shows that the proposed “Leveraged Inefficiency” market anomaly accumulates profit entirely overnight in choppy markets, while in a trending market the profit occurs mainly intraday.
Authors and Affiliations
Chun L. Ching
Keywords
Related Articles
- EP ID EP338516
- DOI 10.9734/AJEBA/2017/38281
- Views 124
- Downloads 0
Factors Affecting Access to Agricultural Loans in Anambra State: An Econometric Analysis
This study was designed to examine the extent to which farmers have benefited from loans/credit activities of commercial banks, as well as the factors affecting accessibility of credit/loans by banks to them. Multistage...
Impact of Interest Rate on Portfolio Management in Nigeria
This study carried out an investigation on the impact of interest rate on portfolio management in Nigeria. Specifically the study analyzed the impact of interest rate on both long term and short term portfolio investment...
Determinants and Transmission Channel of External Debt: Evidence from Malaysia
Malaysia’s external debt has been on an increase, which has become a national concern. Data used for this study was from 1970 to 2013. The VECM results showed that external debt had no transitory but a permanent relation...
Capital Market Indicators and Economic Growth in Nigeria; An Autoregrssive Distributed Lag (ARDL) Model
This study examined the impact of capital market indicators on economic growth in Nigeria from 1986 – 2016. The study adopted Auto Regressive Distributed Lag bound testing and VAR Granger causality econometric tools of e...
Financial Innovation and Efficiency on the Banking Sub-sector: The Case of Deposit Money Banks and Selected Instruments of Electronic Banking (2006 - 2014)
This study evaluates the relationship between financial innovation and bank efficiency as well as the impact of financial innovation on efficiency ratio of deposit money banks in Nigeria from 2006 to 2014. The secondary...