Hendrik Bessembinder - Constant Leverage & Measuring Investor Outcomes
2/19/20261 hr 6 min
In this episode, we welcome back return guest Hank Bessembinder for a deeply analytical conversation spanning leveraged ETFs, volatility, and the future of performance measurement. Hank walks us through his latest research on leveraged single-stock ETFs, clarifying the misunderstood concept of "volatility decay" and decomposing returns into rebalancing effects and frictions. The results are striking: meaningful underperformance relative to simple levered benchmarks, driven by both embedded costs and the mechanics of daily resets. In the second half, we shift gears to a more foundational question: What is a return, really? Hank challenges the dominance of arithmetic averages and even...
Clips
Transcript preview
First 90 secondsBenjamin Felix· Host0:00
[upbeat music] This is the Rational Reminder Podcast, a weekly reality check on sensible investing and financial decision-making from two Canadians. We are hosted by me, Benjamin Felix, chief investment officer, and Cameron Passmore, chief executive officer at PWL Capital.
Cameron Passmore· Host0:17
Welcome to episode three ninety-seven. Nice to be back with you, Ben. Been a while since I've been on the pod.
Benjamin Felix· Host0:23
Been a while, yeah. Good to have you back.
Cameron Passmore· Host0:26
I think it's actually my first time this year to be on, and pretty exciting to be talking with today's return guest, Hank Bessembinder, which is a name most listeners certainly are aware of. As I said, a returning guest, phenomenal guest, so well-spoken, so thoughtful, and I don't want to kind of spill the candy here in the lobby, but 'cause you're gonna do a great intro. But wow, so many interesting things, and it kinda links back to your recent podcast and YouTube on ETF slop and kinda the things that are happening in the marketplace. So with that, Ben, you have to queue this one up.
Benjamin Felix· Host1:02
Yeah, so we had Hank on back in episode three hundred and forty-six last time, and that was actually with Mark and I interviewing Hank. We talked about a bunch of his research then, but he had a couple new papers out that I thought were really, really interesting. And as you mentioned, I included one of them in the video that I did on ETF slop. He has a paper out on levered single stock ETFs, which I think are kind of ridiculous. I think Hank does a very good job