The Use of ETFs in Internationally-Focused Mutual Fund Portfolios

D. Eli Sherrill (), Sara E. Shirley () and Jeffrey R. Stark ()
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D. Eli Sherrill: Illinois State University, Campus, Box 5480, Normal, IL 61790-5480, USA
Sara E. Shirley: Middle Tennessee State University, 1301 E Main St, Murfreesboro, TN 37132, USA
Jeffrey R. Stark: Middle Tennessee State University, 1301 E Main St, Murfreesboro, TN 37132, USA

Quarterly Journal of Finance (QJF), 2021, vol. 11, issue 03, 1-35

Abstract: We explore the implications of US-based, internationally-focused equity mutual funds holding exchange traded funds (ETFs). We observe significant differences in how ETFs are used by international mutual funds compared to their domestic equity counterparts. Internationally-focused mutual funds use ETFs to alter the return-based and country risk exposures of the mutual fund. In addition to altering the risk of the fund, we find increases in ETF-use coincide with a change in performance, an investment in a greater number of countries, and a reduction the number of direct equity holdings.

Keywords: Foreign mutual fund; international mutual fund; exchange traded fund (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1142/S2010139221500129

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