This study has not found evidence that volatility has systematically increased due to the rebalancing issue associated with leveraged ETFs. ... Thus, the trading associated with leveraged ETFs does not appear to have any substantial effect on the market.

Why is volatility bad for leveraged ETFs?

But that's certainly not the case with leveraged ETFs. In fact, volatility will crush you. That's because the compounding effects of daily returns will actually throw off the math, and can do so in a very drastic way. For example, if the S&P 500 moves down 5%, a fund like the SSO should move down 10%.

Does ETF increase volatility?

ETFs are typically more liquid than the basket of underlying securities in terms of bid–ask spread, price impact, and turnover and thus appeal to short-term investors. The authors also find that stocks with high ETF ownership tend to display higher volatility than similar securities.