Information-based trading and information propagation: Evidence from the exchange traded fund market

Liao Xu, Lu Xu, Jing Zhao and Yang Zhao

International Review of Financial Analysis, 2020, vol. 70, issue C

Abstract: This paper studies the information-based trading of exchange-traded funds (ETFs) and the information propagation from the ETF market to its index. We find that the ETF trading triggered by asymmetric information and belief heterogeneity not only accelerates the ETFs' price discovery process but also increases the flow of information to the tracked index. Moreover, the price efficiency of the index also improves along with these two types of trading and their efficiency effects can be further enhanced by a speedier ETFs' price discovery. These observations portray the mechanism of the inter-market information propagation.

Keywords: Disagreement among investors; Exchange-traded funds; Information asymmetry; Market efficiency; Price discovery (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1057521920301393
Full text for ScienceDirect subscribers only

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:eee:finana:v:70:y:2020:i:c:s1057521920301393

DOI: 10.1016/j.irfa.2020.101495

Access Statistics for this article

International Review of Financial Analysis is currently edited by B.M. Lucey

More articles in International Review of Financial Analysis from Elsevier
Bibliographic data for series maintained by Catherine Liu ().