China's Exchange Traded Fund: Is There a Trading Place Bias?

Louis T. W. Cheng (), Hung-Gay Fung () and Yiuman Tse ()
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Louis T. W. Cheng: School of Accounting and Finance, Hong Kong Polytechnic University, Hung Hom, Kowloon, Hong Kong
Hung-Gay Fung: College of Business Administration, University of Missouri St. Louis, One University Plaza, St. Louis, Missouri 63121-4499, USA
Yiuman Tse: College of Business, University of Texas–San Antonia, 501 West Durango Blvd., San Antonio, Texas 78207, USA

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2008, vol. 11, issue 01, 61-74

Abstract: We use Granger causality tests and an EGARCH model to analyze the pricing relations in the US between two exchange traded funds, the iShares FTSE/Xinhua China 25 Index (FXI) and the S&P 500 Index Fund (IVV). Daily data indicates that Hong Kong home market basically drives the FXI returns in the US. In case of intraday analysis, the US-based IVV appears to dominate the pricing of the FXI. The evidence supports the speculative pricing hypothesis that the location of trading has stronger effects than the influence of domestic effects summarized by FXI's lagged returns.

Keywords: Exchange traded funds; China market; Granger causality tests; EGARCH model; JEL Classification: F21; JEL Classification: F36; JEL Classification: G15 (search for similar items in EconPapers)
JEL-codes: G1 G2 G3 (search for similar items in EconPapers)
Date: 2008
References: View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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DOI: 10.1142/S021909150800126X

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