MORL - Is An ETN Yielding 20% Expected To Decline In Price By 4% A Year Better Than One Yielding 15% Not Expected To Decline?
Decay, Drift and Downward Bias in Leveraged ETNs
Much has been written about possible structural aspects of leveraged ETNs, that could bias the value of leveraged ETNs downward, relative to unleveraged assets that the ETNs are based on. Roll yield, tracking errors, beta-slippage, management fees and expenses are commonly cited as causes for the relative decay. Roll yield is associated with both ETFs and ETNs that employ commodity futures. Beta-slippage is based on the fact that if the underlying asset rises on day one by any given percentage amount and then declines so that the