Episode 397: Hendrik Bessembinder - Constant Leverage & Measuring Investor Outcomes
The Rational Reminder Podcast · 2026-02-19 · 1h 6m
Episode notes
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 geometric means, arguing that neither truly captures the long-term investor experience. He introduces the concept of the sustainable return - a measure based on the cash flows an investment can support without depleting capital - and outlines how it could reshape academic finance and real-world financial planning. Key Points From This Episode: (0:01:03) Welcome back to Hank Bessembinder and overview of his recent research.