What risks do exchange-traded funds pose?

Grant Turner and Vladyslav Sushko

Financial Stability Review, 2018, issue 22, 133-144

Abstract: There has been remarkable growth in the exchange-traded fund (ETF) market over the past decade. For many investors in equities and bonds, ETFs have become a preferred investment vehicle, providing low-cost exposure to diversified portfolios through the tracking of an index, while also allowing frequent on-market trading. Notwithstanding these clear benefits to investors, ETFs may pose some market risks. Among the main risks is that heavy trading of ETFs adds to co-movement and volatility in security prices. Price dynamics in periods of stress could also be affected by investor expectations about continued high liquidity or possible impairment of the ETF primary-secondary market trading mechanism. Risks may become more acute if complex ETF structures were to grow to a bigger share of activity.

Date: 2018
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://publications.banque-france.fr/sites/defaul ... bility_review_22.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bfr:fisrev:2018:22:12

Access Statistics for this article

More articles in Financial Stability Review from Banque de France Banque de France 31 Rue Croix des Petits Champs LABOLOG - 49-1404 75049 PARIS. Contact information at EDIRC.
Bibliographic data for series maintained by Michael brassart ().