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This study analyses empirically the Granger causality between commodity ETFs listed in KRX (Korea Stock Exchange) and the price determinants of the underlying commodities as well as the KOSPI200 index and the underlying indices, and compares the performance of four commodity ETFs : gold futures, oil futures, soybean futures and the copper price. The main findings are as follows : First, the commodity ETFs tracking gold futures, oil futures and soybean futures prices in the sample from the inception to June 2015 were not directly related to the price determinants of the underlying commodities except for the copper ETF which was affected by the oil price as one of the price determinants of copper. In addition, all four ETFs were not related to the KOSPI200 index while they were affected by the underlying indices. Second, the soybean futures ETF outperformed the KOSPI200 index in terms of the cumulative returns and the oil futures ETF recorded the worst performance in terms of the cumulative returns and IR (information ratio). Third, the average tracking error of each ETF except for the oil futures ETF showed a positive value and the price of each ETF except for the soybean futures ETF has been undervalued compared to its net asset value. From the above findings, we can infer that investors in the copper ETF should closely watch the movement of the oil price to enhance the return and investors in the commodity ETFs should first consider agriculture-related ETFs rather than oil-related ETFs considering the price volatility. In addition, the inverse ETFs for copper and agriculture-related products should be introduced following the oil and gold futures inverse ETFs to protect against negative returns in a declining period of commodity prices.

This study analyzes the impact of Korea ETF market growth on trading costs, information efficiency and corporate valuation focusing on the behaviors of individual component stocks in ETFs.

The empirical analysis exhibits that an increase in the number of stocks held by ETFs has statistically significant effects on the bid-ask spreads of component stocks. In terms of the information efficiency, the correlations between componet stocks and the market, and industry return are statistically significant, suggesting the expansion of the ETF market could be a factor to allow market systematic risks higher.

The impact of ETF on PBR is found to be statistically significant in the positive direction, howing that the growth of the ETF market could be conducive to making the value of component stocks overvalued relative to their fundamentals.

These findings explain that negative side effects may occur from the rapid expansion of the ETF market and suggest special attention and policy considerations are needed to avoid unintended effects resulting from the growth of the ETF market.

This paper aims to provide the necessity to activate long-term exchange-traded derivatives (ETD) in Korea. In the era of aging, low interest rates and low economic growth, the investment demand for long-term financial products, and its hedging demand have steadily increased. Unfortunately, long-term ETD do not trade in Korea, and this study presents political suggestions to invigorate long-term ETD based on overseas cases and empirical analysis. Specifically, this study suggests the necessity to activate exchange traded funds (ETFs) options, long-term Korea treasury bond futures and options and long-term Volatility Index of Korea Composite Stock Price Index future and options. The introduction of those long-term ETD not only contributes to providing long-term investment and hedging vehicles but also reduces market inefficiencies in the Korean industry of ETFs, bonds and structured products.

This study focused on the Korea ETF which is listed and traded in NYSE (New York stock exchange) and analyzed empirically the price discovery effect of NYSE Korea ETF on the Korean stock market. There was almost no related research even though the Korea ETF listed in NYSE did not only show high correlation with the Korean stock market but also was often used as a predictive tool of the Korean stock market by investors.

The significance of this study is in conducting a price discovery analysis on the Korea ETF traded in NYSE by using sample data of ‘iShares MSCI South Korea Capped (symbol: EWY)' of the most abundant liquidity among Korea ETF traded in NYSE. Also, the Korea ETF traded at in Korean nighttime is the spot trading, but since the KOSPI200 nighttime futures are the derivatives trading, there is an implication that the price discovery effect between spot market and derivatives market can be compared by comparing each price discovery effect.

In this study we compared the effectiveness of different ETFs. For this purpose, we analyzed the volatility spillover effect (process) among KOSPI200, KOSPI200 futures and KOSPI200 ETFs such as KODEX200, KOSEF200, KINDEX200, TIGER200 using multi-variate GARCH model. The sample was generated from high frequency data set over the period from 05/24/2009 to 12/29/2011 (669 days). The volatility spillover effect was examined at 1, 5, 10, 30 minute' intervals for each market and the main results are as follows;

First, KODEX200 has the highest correlations with KOSPI200 and KOSPI200 futures in four ETFs.

Second, all ETFs have a cointegrated relationship with its underlying asset KOSPI200 as KOSPI200 and KOSPI200 futures do.

Third, in the daily data the volatility spillover among ETFs, KOPSI200 and KOSPI200 futures was investigated in part but it was not consistent.

The fourth, according to the result derived from high-frequency data analysis the volatility spillover effect from KODEX200 to KOSPI200 (KOSPI200 futures) is bigger than that from KOSPI200 (KOSPI200 futures) to KODEX200 while other ETFs are not.

The overall results indicate that KODEX200 which is the biggest ETF in volume performs very important roles in finding the price of underlying asset and further researches can be expected.

There have been the concerns that leveraged and inverse ETFs contribute to the financial crisis of 2007~2008. Several researchers have investigated this important issue. However, there is no consensus yet whether leveraged and inverse ETFs destabilize a financial market. Financial stability is an important subject for policy makers, practitioners and academia. ETFs are one of the most important financial innovations. In particular, leveraged and inverse become more and more influential. Therefore, such lack of academic and practical consensus is a significant challenge. In this paper, we analyze whether leveraged and inverse ETFs affect the price and volatility of Korean market. Thus, our research contributes to the body of literature and to the design of public policies and trading strategies. Our research can also advance the development of ETF industry, one of the fastest growing and promising sector in the Korean financial market.

This study analysed the effect of individual investors‘ sell-buy imbalance on asymmetric volatility in returns using daily transaction data of the Korean ETF market. Major Finding of the Paper are as follows. First, there exists asymmetric volatility in the sense that the return, volatility, tends to increase when returns fall unexpectedly in the ETF market as well as in stock market. In this case, individual investors' increased selling activity is the main reason behind the increase the volatility while institutional investors' selling activity does not seem to cause asymmetric volatility. Second, when the prices go down, individual investors show herding behavior in transactions because increased selling activity by individual investors amplify volatility. Third, in addition to herding behavior, individual investors' transaction pattern as uninformed investors or as liquidity transactors also causes asymmetric volatility. Fourth, in some large ETFs, disposition effect of individual investors who are reluctant to sell when prices go down plays an important role in generating asymmetric volatility.

This paper examines the price discovery process among the Korea stock index markets using the vector error correction model (VECM) and the multivariate generalized auto regressive conditional heteroskedasticity (M-GARCH) model. The minute-by-minute price series of the KOSPI200 index, KOSPI200 futures, and KODEX200 are cointegrated.

The empirical results are summarized as follows: First, VECM estimation results indicate that when the cointegrating relationship is perturbed by the arrival of ntis, the KODEX200(ETF) does not adjusted to restore equilibrium. This is the task of the KOSPI200 futures and spot. These two index securities use the KODEX200 to represent the ntioequilibrium price, with the KOSPI200 futures responding faster than the KOSPI200 spot. When the cointegrating relationship betweeiesOSPI200 spot and futues is perturbed by the arrival of ntis, the KOSPI200 spot does adjusted to restore equilibrium. Next, the results from the multivariate GARCH modes indicate that the volatilities of esOSPI200 spot and futures markets suggest unidirectiona1volatility spillover from KOSPI200 futures to KOSPI200 spot. KODEX200(ETF) volatilities spill over bothesOSPI200 spot and futures markets. and this happen in the reverse direction with a strong effect from the KODEX200 to KOSP200 futures and spot.

The overall findings indicate that the KODEX200(ETF) market dominates KOSPI200 futures and spot in the price discovery process. The regulation of Instutional traders on trading on futures markets explains its superior price discovery function.

The authors analyse six actively traded VIX Exchange Traded Products (ETPs) including 1x long, −1x inverse and 2x leveraged products. The authors assess their impact on the VIX Futures index benchmark.

Long-run causal relations between daily price movements in ETPs and futures are established, and the impact of rebalancing activity of leveraged and inverse ETPs evidenced through causal relations in the last 30 min of daily trading.

High frequency lead lag relations are observed, demonstrating opportunities for arbitrage, although these tend to be short-lived and only material in times of market dislocation.

The causal relations between VXX and VIX Futures are well established with leads and lags generally found to be short-lived and arbitrage relations holding. The authors go further to capture 1x long, −1x inverse as well as 2x leveraged ETNs and the corresponding ETFs, to give a broad representation across the ETP market. The authors establish causal relations between inverse and leveraged products where causal relations are not yet documented.

Commodity ETF, Cumulative Return, Tracking Error, Information Ratio, Inverse ETF