Leveraged Etfs Systematic Risk Mgmt

The three-gate gauntlet · genuine only if it clears all three and survives adversarial refutation

Gate 1

Survivorship-free

n/a

not a factor universe

Gate 2

Placebo ≥ P95

not run

Gate 3

Cost-aware net

RF +7.33

positive, not certified

Failedfailed refutation

Worst 12-month leg (RF)-0.96

−1.00 floor0

Every strategy here — winners included — loses in its worst 12 months. Depth is honest context, not the verdict.

Did not clear our screen — no tradeable net edge survived modelled costs.

This is a market-timing overlay: a moving-average rule switches exposure between an equity vehicle and short-term bonds, aiming to sidestep drawdowns. The source paper applies it to leveraged ETFs; our test proxied the leveraged vehicle away with 1x SPY.

What we found

Implemented as an SPY/SHY moving-average risk-managed switch, the rule is a market-timing overlay with no rank-skill (cross-sectional) test behind it, so what it captures is beta, not alpha. Its worst-year RF was -0.96, i.e. a losing year that the timing rule did not avoid. On this basis it does not qualify as a validated factor-leg, and it is not a standalone tradeable strategy.

How we tested it

2005–2026 test windowmodelled liquidity-aware costssurvivorship na

Tested on a set of liquid ETFs (SPY/SHY), daily, over the study window. Realistic modelled costs.
Placebo / robustness test: real result vs random baskets or shuffled signals (real vs the 95th percentile of random)

Source: Leveraged ETFs with systematic risk management (QuantPedia; moving-average risk overlay)
Read the paper ↗

← The Academic Audit — all 54 studies

Research, not investment advice. “Validated” factor-legs are market-neutral diversifying building blocks with a losing worst year — none is a standalone tradeable strategy. Metrics are cost-aware and modelled (not live fills); the 2005–2026 test window is out-of-sample versus the source paper. Dollar figures are not returns and are omitted by design.