Exchange Traded Funds (ETFs)

Itzhak Ben-David, Francesco A. Franzoni and Rabih Moussawi
Additional contact information
Francesco A. Franzoni: University of Lugano and Swiss Finance Institute
Rabih Moussawi: Villanova University and University of Pennsylvania

No 16-64, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: Over two decades, ETFs have become one of the most popular investment vehicle among retail and professional investors due to their low transaction costs and high liquidity, taking market share from traditional investment vehicles such as mutual funds and index futures. Research has shown that in addition to the benefits of enhanced price discovery, ETFs add noise to the market: prices of underlying securities have higher volatility, greater price reversals, and higher correlation with the index. Arbitrage activity is a necessary component in minimizing the price discrepancy between ETFs and the underlying securities. During turbulent market episodes, however, arbitrage is limited and ETF prices diverge from those of the underlying securities.

Keywords: ETFs; Mutual Funds; Investment Managers; Volatility; Arbitrage; Fund Flows (search for similar items in EconPapers)
JEL-codes: G12 G14 G15 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2016-10
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2865734 (application/pdf)

Related works:
Working Paper: Exchange Traded Funds (ETFs) (2017)
Working Paper: Exchange Traded Funds (ETFs) (2016)
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:chf:rpseri:rp1664

Access Statistics for this paper

More papers in Swiss Finance Institute Research Paper Series from Swiss Finance Institute Contact information at EDIRC.
Bibliographic data for series maintained by Ridima Mittal ().