Are ETFs good vehicles for diversification? New evidence for critical investment periods

Maria Elisabete Duarte Neves, Carla Manuela Fernandes and Pedro Coimbra Martins

Borsa Istanbul Review, 2019, vol. 19, issue 2, 149-457

Abstract: This paper discusses the real effects of diversification, risk, and performance for country-specific exchange-traded funds (ETF) investment vehicles, using a sample of twenty-two iShares for the period 2004–2015, which covers the global financial crisis. Typically, the delimitation of the periods of crises is based on noteworthy events, such as the collapse of Lehman Brothers. In this context, we consider an alternative approach to define the time frames to obtain a more detailed characterization of crisis periods, using a nonhierarchical clustering technique. This method comprises the clustering of the dates with similar ETF prices across countries, which allows the formation of relatively sequential time frames as a function of price volatility. We conclude that the benefits of diversification through this investment vehicle are limited, particularly in times of crisis, indicating the existence of contagion between funds that are indexes.

Keywords: Clustering; Diversification; ETFs; Financial crisis; Principal component analysis (search for similar items in EconPapers)
JEL-codes: C44 C61 G11 (search for similar items in EconPapers)
Date: 2019
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.sciencedirect.com/science/article/pii/S2214845018303417 (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:bor:bistre:v:19:y:2019:i:2:p:149-157

Access Statistics for this article

More articles in Borsa Istanbul Review from Research and Business Development Department, Borsa Istanbul Contact information at EDIRC.
Bibliographic data for series maintained by Ahmet Palu ().