Direct and Indirect Effects of Index ETFs on Spot†Futures Pricing and Liquidity: Evidence from the CAC 40 Index

Laurent Deville, Carole Gresse and Béatrice de Séverac

European Financial Management, 2014, vol. 20, issue 2, 352-373

Abstract: This paper investigates how the introduction of an Exchange†Traded Fund (ETF) directly or indirectly impacts the underlying†index spot†futures pricing. Using intraday data for financial instruments related to the CAC 40 index, we do not find that the spot†futures price efficiency improvement observed after ETF introduction is explained either by the direct effect of ETF shares being used in arbitrage trades or by the indirect effect of ETF trading improving the liquidity of index stocks in the short†run. Some of our findings suggest that the efficiency improvement could rather result from a structural change in the way index traders distribute across index markets, with the ETF market absorbing the liquidity demand from some hedgers or passive index traders.

Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://doi.org/10.1111/j.1468-036X.2011.00638.x

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:bla:eufman:v:20:y:2014:i:2:p:352-373

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1354-7798

Access Statistics for this article

European Financial Management is currently edited by John Doukas

More articles in European Financial Management from European Financial Management Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().