Rational Uses of Leveraged and Inverse ETPs

What are rational uses of leveraged and inverse exchange-traded products (ETP), which offer easy access to amplified positions in various benchmark indexes spanning stocks, bonds, commodities and volatility? In their April 2020 paper entitled “Levered and Inverse ETPs: Blessing or Curse?”, Colby Pessina and Robert Whaley review the mechanics of leveraged and inverse ETPs, simulate their expected performance of those based on six popular benchmarks and document actual performance of 35 ETPs. They employ Monte Carlo simulations assuming normally distributed log returns for underlying indexes, with mean and standard deviation estimates based on historical daily returns during December 20, 2005 through March 13, 2020. Using simulation inputs as specified and data for 35 actual ETPs as available through mid-March 2020, they find that:

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