Aug 2026· Korean Journal of Financial Studies· 0 citations· 15 references
Abstract
This study analyzes the microstructural mechanisms through which the rapidly expanding single-stock leveraged ETFs in the Korean capital market impede the price discovery function and amplify endogenous volatility. Based on a dynamic simulation utilizing the actual market scales of large-cap semiconductor stocks, the results demonstrate that mechanical, pro-cyclical rebalancing concentrated at the market-on-close (MOC) induces directional distortion, systematically driving asset prices away from their fundamental values depending on market conditions. In particular, this study provides evidence that as the assets under management (AUM) of these linked products expand, the liquidity breakdown threshold of the limit order book declines steeply. Consequently, even minor illiquidity frictionscan cause mechanical selling pressure to escalate directly into tail risk. Drawing on these findings, this study offers policy implications to enhance macroprudential stability and prevent the transmission of microstructural risks into systemic risks. Specifically, we propose the introduction of dynamic AUM caps, the normalization of creation fees to mitigate structural conflicts of interest among Authorized Participants (APs), and restrictions on listing ultra-high leveraged products.
Preventing systemic financial risk is a cornerstone of economic security and social stability, as well as a fundamental prerequisite for the sound operation of the financial system and high-quality economic development. Treating the New Asset Management Regulations as a policy shock, this study constructs a generalized difference-in-differences (DID) model using panel data for Chinese non-financial listed companies from 2008 to 2023 and systematically examines the mechanisms and heterogeneous effects of stringent financial regulation on corporate leverage manipulation. The results show that, through look-through regulation, the New Asset Management Regulations effectively compress the scope for shadow-banking arbitrage and directly reduce corporate leverage manipulation. The policy also significantly restrains leverage manipulation by directing credit resources toward more efficient uses, improving the quality of corporate information disclosure, and enhancing financing efficiency. The inhibitory effect is particularly pronounced among firms with relatively high allocations to financial assets. Heterogeneity analysis further indicates that the effect is stronger in regions with greater financial deepening, in industries with lower market concentration, and in firms whose managers possess stronger financial expertise. Accordingly, this study recommends deepening differentiated look-through regulation, improving coordination in the regional allocation of financial resources, and strengthening internal corporate governance to establish a long-term mechanism for curbing leverage manipulation and to reinforce the foundations of systemic financial-risk prevention.
Tingting Zhou, Junchi Chu, Jiawei Wang· Journal of Economics and Man...· 0 citations
This study examines the impact of monetary policy shocks (MPS) on future stock price crash risk (SPCR), using a sample of US firms from 1995 to 2019. We find that expansionary MPS significantly reduce the likelihood of SPCR, while contractionary MPS show no statistically significant effect on SPCR. These results remain robust after controlling for omitted variable bias, reverse causality concern, selection bias, varying forecasting windows, and incorporating different industry definitions. Furthermore, we find that expansionary MPS prevent the accumulation of bad news by curbing aggressive accrual and real earnings management (REM). We also provide evidence for two non–earnings–management‐based channels, where expansionary shocks alleviate external financing constraints and improve investment efficiency. The relation between expansionary MPS and SPCR is more pronounced among firms with better governance monitoring, lower ex‐ante risk, less information asymmetry, greater financial constraints, higher product market competition, and greater stock return sensitivity to MPS. Overall, our findings highlight the important role of macroeconomic policy uncertainty in shaping corporate financial disclosure.
Shun-Shun Xu, Haifeng Guo, Yeqin Zeng· International Journal of Fin...· 0 citations
We argue that speculators preying on the closing rebalances of leveraged exchange-traded funds (LETFs) contributed to the Korean market's extreme volatility in 2026. An LETF's mandated daily rebalance is sized by the day's return, which generates an upward-sloping demand at market close. In response, rational speculators pre-position, enlarge the fund's order, and liquidate into the demand they have induced. Consistent with this mechanism, Korean stocks tracked by LETFs reverse about 75% of their first-day response to pre-open U.S. news by the next close and oscillate for several days thereafter, a pattern absent in every control group. Our quantification implies that self-reinforcing rebalance raised SK Hynix's annualized volatility from 100.0% to 136.7% over nine weeks and cost its products'predominantly retail holders 17.6% of their initial investment. Dispersing the rebalance across the trading day may backfire, whereas a flexible leverage multiple could help.
This study investigates the impact of China's recent real estate crisis, stemming from Evergrande's struggles, on the return and risk profiles of US‐listed exchange traded funds (ETFs) tracking Chinese stock market indexes. Analysing 26 funds from February 2, 2018 to December 31, 2024, we first employ a VAR model to assess contagion and subsequently use Augmented GARCH and scalar‐BEKK models to quantify the extent of spillover effects. Our findings reveal that while the initial bond payment failure on September 23, 2021, likely affected ETF performance, the official default on December 9, 2021, precipitated a significant and acute decline in returns and an elevation in volatility. Correlation and VAR analyses underscore strong and intensifying linkages between the ETFs and the Chinese stock market, particularly during the crisis period. Furthermore, both the Augmented GARCH and scalar‐BEKK models robustly demonstrate a persistent and magnified transmission of volatility from the Chinese market to the ETF sector. This research offers critical insights for investors managing China‐related ETF volatility and emphasizes the need for policymakers to address systemic risks from the Chinese economy within the global financial system.
This article explores the relationship between economic growth shocks and market concentration within capitalization-weighted equity indexes, using the Herfindahl–Hirschman Index (HHI) as a measure of concentration. Deploying a constant-growth discounting framework, we demonstrate how market stress amplifies concentration and drives a shift in equity style performance as capital flows into large-cap growth firms that are perceived as safer during downturns. Conversely, economic recovery and inflation reduce concentration, creating opportunities for value stocks and small-cap stocks to rebound. Empirical analysis of historical events—including the dot-com bubble, the 2008 financial crisis, and the COVID-19 pandemic—illustrates the cyclical nature of market concentration driven by changes in earnings dispersion and growth sensitivity. The results show how growth and value stocks react differently to economic shocks and inflationary periods. By understanding these dynamics, practitioners can refine their portfolio strategies, time style rotations, and anticipate shifts in market leadership tied to broader economic conditions. The article’s findings also provide a practical tool for interpreting HHI trends and their implications for asset allocation in an unpredictable market environment.
Adam Papallo· The Journal of Beta Investme...· 0 citations
This study examines whether monetary tightening amplifies the negative effect of VIX shocks on U.S. bank stock returns. Using daily public data from January 2010 to March 2026, the analysis constructs a panel of returns for four exchange-traded funds: KBE, KRE, XLF and SPY. Large increases in the CBOE Volatility Index are treated as episodes of market fear and risk repricing. A tightening regime is defined as a trading day on which the effective federal funds rate has increased by at least 25 basis points over the previous 90 trading days. The baseline factor-adjusted regressions show that the interaction between VIX shocks and tightening regimes is significantly negative. In the preferred KBE specification, a VIX shock during a tightening regime is associated with an additional daily excess return of approximately -0.278 percentage points. Heterogeneity tests indicate that this effect is concentrated in bank ETFs, especially the regional-bank ETF KRE, and is not significant for the broader financial-sector ETF XLF or the market ETF SPY. Event-window evidence shows lower five-day cumulative excess returns for KBE and KRE after VIX shocks in tightening regimes. The findings provide conditional asset-pricing evidence on bank equity risk under monetary tightening.
Junhe Guan· Advances in Economics, Manag...· 0 citations
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