Prevalence of \u0027dumb\u0027 retail money offers \u0027bankable\u0027 returns if you invest by going against the flow. Read on.
The contrarian nature of ETF flows is particularly strong for leveraged funds, thanks to the prevalence of “dumb” retail money, the academic findings show.By clicking on the sign up button you consent to receive the above newsletter from Postmedia Network Inc. You may unsubscribe any time by clicking on the unsubscribe link at the bottom of our emails. Postmedia Network Inc. | 365 Bloor Street East, Toronto, Ontario, M4W 3L4 | 416-383-2300A welcome email is on its way.
“The short-term, high-octane returns promised by leveraged products makes them especially attractive to this subset.”Article content The authors believe their findings result from ETF flows representing “non-fundamental” demand, which they define as “beliefs that are uncorrelated with fundamental news” as well as “over- and under-reaction to fundamental news.”Article content
Instead, the authors argue that ETFs provide a “really clean way to observe mispricing” because of the trading mechanism that whirrs away behind the scenes to keep them fairly priced, at least in normal market conditions.
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