How ETFs Amplify the Global Financial Cycle in Emerging Markets

Nathan Converse, Eduardo Levy-Yeyati and Tomas Williams
Authors registered in the RePEc Author Service: Eduardo Levy Yeyati

The Review of Financial Studies, 2023, vol. 36, issue 9, 3423-3462

Abstract: We study how the growth of exchange-traded funds (ETFs) affects the sensitivity of international capital flows to the global financial cycle. Using comprehensive fund-level data on investor flows, we show that their sensitivity to global financial conditions for equity (bond) ETFs is 2.5 (2.25) times higher than for equity (bond) mutual funds. This higher sensitivity can be directly linked to ETFs underlying shorter-trading-horizon clientele that trades more often in response to shocks. Using country-level data, we find that where ETFs hold a larger share of financial assets, equity inflows and prices become more sensitive to global risk.Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

JEL-codes: F32 G11 G15 G23 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (4)

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Related works:
Working Paper: How ETFs amplify the global financial cycle in emerging markets (2021)
Working Paper: How ETFs Amplify the Global Financial Cycle in Emerging Markets (2020)
Working Paper: How ETFs Amplify the Global Financial Cycle in Emerging Markets (2019)
Working Paper: How ETFs Amplify the Global Financial Cycle in Emerging Markets (2019)
Working Paper: How ETFs Amplify the Global Financial Cycle in Emerging Markets (2018)
Working Paper: How ETFs Amplify the Global Financial Cycle in Emerging Markets (2018)
Working Paper: How ETFs Amplify the Global Financial Cycle in Emerging Markets (2017)
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