Document Type
Article
Publication Date
5-2025
Abstract
This study examines the performance dynamics of U.S. options exchange-traded funds (ETFs), whose investment strategy involves options contracts. Analyzing monthly returns data from February 2014 to April 2023, we evaluate the risk-adjusted performance, volatility, and market sensitivity of U.S. options ETFs relative to U.S. and global equities. Using Carhart's four-factor model, we find that U.S. options ETFs yield lower monthly returns than those of U.S. equities but outperform global equities, suggesting potential diversification benefits. While U.S. options ETFs underperformed during the COVID-19 pandemic, they demonstrated resilience thereafter, offering higher rewards for downside risk. We also find that managerial expertise may not consistently improve performance or market timing. These results remain robust across various checks, including analyzing lagged public information, adopting multiple estimation methods, and investigating diverse market conditions. This study contributes to understanding the performance dynamics of options ETFs, emphasizing the importance of market conditions and managerial strategies in investment decisions.
Recommended Citation
Hadad, Elroi; Malhotra, Davinder K.; and McLeod, Robert, "U.S. Options Exchange-Traded Funds: Performance Dynamics and Managerial Expertise" (2025). School of Business Faculty Papers. Paper 13.
https://jdc.jefferson.edu/sbfp/13
Creative Commons License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.
Language
English
Comments
This article is the author's final published version in Borsa Istanbul Review, 25, Issue 3, May 2025, Pages 423-434.
The published version is available at https://doi.org/10.1016/j.bir.2025.01.012. Copyright © 2025 Borsa İstanbul Anonim Şirketi. Published by Elsevier B.V.