tag:blogger.com,1999:blog-5465015914589377788.post3694413922873311101..comments2024-02-17T11:07:06.232-05:00Comments on Michael James on Money: The Dangers of Horizons BetaPro ETFsMichael Jameshttp://www.blogger.com/profile/10362529610470788243noreply@blogger.comBlogger9125tag:blogger.com,1999:blog-5465015914589377788.post-54256149471417835102017-10-28T09:56:42.012-04:002017-10-28T09:56:42.012-04:00Circling back to this post after several years, I ...Circling back to this post after several years, I now think the Anonymous commenter was right, and I was mostly wrong; much of the 5.1% gap within a single year could easily be explained by the daily re-baselining.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-42841268593871011272011-02-17T17:34:56.068-05:002011-02-17T17:34:56.068-05:00@Anonymous: Your question doesn't seem seriou...@Anonymous: Your question doesn't seem serious, but in case it is, you should know that even if there is a crash followed by a boom, you aren't guaranteed to make money. I recommend understanding why before making a decision on what to do.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-6146375409034862552011-02-17T17:05:00.115-05:002011-02-17T17:05:00.115-05:00I was thinking of putting some money in the bear h...I was thinking of putting some money in the bear hxd and waiting for the market to crash again, resulting in the doubling, or more, of my money. From there I was going to reinvest in the bull hxu, wait for the market to correct itself & voila, another big profit. Think this is a good or bad idea?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-79657842478551893042008-06-20T23:51:00.000-04:002008-06-20T23:51:00.000-04:00Patrick: Few things make me happier than being as...Patrick: Few things make me happier than being asked a math question. Here is a good explanation on Wikipedia: <A HREF="http://en.wikipedia.org/wiki/Volatility_(finance)" REL="nofollow">volatility link</A>.<BR/><BR/>Basically, one measure of volatility, the variance, grows in proportion to time. Standard deviation is the square root of variance, and so the standard deviation of returns grows as the square root of time. <BR/><BR/>The gap between expected return and expected compound return is equal to half the variance (this falls out of computing the expected value of the lognormal probability distribution). If an investment has double exposure to the index, then its standard deviation is double, which makes the variance 4 times bigger and the gap between expected return and expected compound return 4 times bigger.<BR/><BR/>You can see why I tried to avoid too many of these details in the post entry. If any of this isn't clear, let me know and I'll try again.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-51850186178689100082008-06-20T22:14:00.000-04:002008-06-20T22:14:00.000-04:00Michael, can you explain where you get this square...Michael, can you explain where you get this square relationship between volatility and duration? Also, you seem to have used a square relation here too (double exposure turns 2% under-performance into 8%). I'd like to understand the math behind these. Thanks!Patrickhttps://www.blogger.com/profile/16816252455472704262noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-21891850820890601342008-06-19T10:22:00.000-04:002008-06-19T10:22:00.000-04:00Anonymous: According to the Horizons BetaPro web ...Anonymous: According to the Horizons BetaPro web site, the return from 2007 January 8 to 2008 May 31 was 27.27%. The closing price May 30th was $34.50 making the price at inception $27.11. This differs from the TSX chart. Perhaps this ETF sold at a discount initially? Who knows. Using the $27.11 starting figure, the return to date is now 31.9%, far short of the apparent 42% that you report. I'm confident that HXU will continue to underperform double the TSX 60 by significant amounts.<BR/><BR/>As for wave trading and other market timing methods, there is no evidence that anyone has succeeded at this over the long term. Be careful not to lose all your money.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-76598805514680882162008-06-19T02:29:00.000-04:002008-06-19T02:29:00.000-04:00Well, compared to the inception date of HXU (about...Well, compared to the inception date of HXU (about 17 months ago), HXU has gained ~42% whereas XIC has gained only ~19%. Your hypothesis simply doesn't bear out! HXU has provided about a 20% (=1.42/1.19) better return over this period than XIC with all fees considered. I think any buy & hold investor would take a 20% improvement, yet that is not the best use of any index fund. Indices are best exploited through wave trading. Buying HXD today, & then about four months from now short selling it or buying HXU, should yield a superior return. Rinse & repeat.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-66951329519749767232008-06-18T10:16:00.000-04:002008-06-18T10:16:00.000-04:00Anonymous:Daily re-baselining causes some volatili...Anonymous:<BR/><BR/>Daily re-baselining causes some volatility losses within a single year, but not that much. Leverage always has costs, but they are spread out over the year and are too small to be visible in the returns of a single day.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-10311095498640356192008-06-18T06:47:00.000-04:002008-06-18T06:47:00.000-04:00HiIs the gap you identified not due (at least in p...Hi<BR/><BR/>Is the gap you identified not due (at least in part) by the daily re-baselining?<BR/><BR/>qAnonymousnoreply@blogger.com