Search results

1 – 10 of over 35000
Article
Publication date: 12 April 2013

Narat Charupat and Peter Miu

The purpose of this paper is to provide a brief review of three strands of the literature on exchangetraded funds.

4441

Abstract

Purpose

The purpose of this paper is to provide a brief review of three strands of the literature on exchangetraded funds.

Design/methodology/approach

The paper starts with a review of the history of the growth of exchangetraded funds and their characteristics. The paper then examines the key factors and findings of the existing studies on, respectively, the pricing efficiency, the tracking ability/performance, and the impact on underlying securities of exchangetraded funds.

Findings

Although there has been a substantial amount of research conducted to advance our knowledge on the trading, management, and effect of exchangetraded funds, the findings are still far from conclusive in addressing a number of research questions.

Practical implications

Investors and other market participants will find this review informative in enhancing the understanding of exchangetraded funds.

Originality/value

By highlighting the general theme of the related research findings, the paper provides a systematic review of the existing literature that future researchers can utilize in developing their research agenda.

Details

Managerial Finance, vol. 39 no. 5
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 7 June 2013

Timothy Peterson

The paper aims to determine if a country's Economic Freedom Index value has any relationship to the return of the related country specific exchange traded fund.

Abstract

Purpose

The paper aims to determine if a country's Economic Freedom Index value has any relationship to the return of the related country specific exchange traded fund.

Design/methodology/approach

A total of 36 country specific exchange traded funds were selected for use in this study. The historical returns for 2011, the three‐year period ending in 2011, and the five‐year period ending in 2011 were recorded if available for each exchange traded fund. Each exchange traded fund (ETF) was placed into one of four groups based upon its country's overall Economic Freedom Index value. The range of Economic Index values for each group was the same ones used by the publishers of the Economic Freedom Index. The mean ETF return and standard deviation for 2011, three‐year, and five‐year periods were calculated for each of the four groups. The mean/standard deviation of the Economic Freedom Index and each of its components for 2011, the mean of the three‐year period, and the mean of the five‐year period were calculated for each of the four groups. The degree of statistical significance between the mean returns of the four groups was determined by using ANOVA. The correlation coefficients and the degree of statistical significance were calculated between each component of the index, between each component and the overall index value, and between the overall index value and the ETF returns.

Findings

The correlations between the components of the Economic Freedom Index generally tend to be positive and statistically significant. The correlations between the components of the Economic Freedom Index and the Economic Freedom Index tend to be positive and statistically significant. The correlation between the mean ETF returns of the various groups and the value of the mean Economic Freedom Index tends to be mixed. There appears to be no statistical significance of the difference between the mean ETF returns of each group and the mean overall score of the Economic Freedom Index for that group. For the year 2011 the level of significance was 0.103, for the three‐year period the level of significance was 0.541, and for the five‐year period the level of significance was 0.132. The differences within each group are more than the differences between the groups. The value of the Economic Freedom Index does not appear to correlate with the return of the country specific exchange traded fund.

Originality/value

The paper relates a country's environment for conducting business as represented by its Economic Freedom Index to the equity returns of firms in that country. The results of this study would be of interest to those individuals or institutions making investment decisions regarding country specific exchange traded funds. If a positive correlation exists between the index value and the return of the exchange traded fund, this information could improve the prediction of country specific exchange traded fund returns.

Details

Managerial Finance, vol. 39 no. 7
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 7 September 2015

Stoyu I. Ivanov

The purpose of this paper is to find if erosion of value exists in grantor trust structured exchange traded funds. The author examines the performance of six currency exchange

Abstract

Purpose

The purpose of this paper is to find if erosion of value exists in grantor trust structured exchange traded funds. The author examines the performance of six currency exchange traded funds’ tracking errors and pricing deviations on intradaily-one-minute interval basis. All of these exchange traded funds are grantor trusts. The author also studies which metric is of more importance to investors in these exchange traded funds by examining how these performance metrics are related to the exchange traded funds’ arbitrage mechanism.

Design/methodology/approach

The Australian Dollar ETF (FXA) is designed to be 100 times the US Dollar (USD) value of the Australian Dollar, the British Pound ETF (FXB) is designed to be 100 times the USD value of the British Pound, the Canadian Dollar ETF (FXC) is designed to be 100 times the USD value of the Canadian Dollar, the Euro ETF (FXE) is designed to be 100 times the USD value of the Euro, the Swiss Franc ETF (FXF) is designed to be 100 times the USD value of the Swiss Franc and the Japanese Yen ETF (FXY) is designed to be 10,000 times the USD value of the Japanese Yen. The author uses these proportions to estimate pricing deviations. The author uses a moving average model based on an Elton et al. (2002) to estimate if tracking error or pricing deviation are more relevant in ETF arbitrage and thus to investors.

Findings

The author documents that the average intradaily tracking errors for the six currency ETFs are relatively small and stable. The tracking errors are highest for the FXF, 0.000311 percent and smallest for FXB, −0.000014 percent. FXB is the only ETF with a negative tracking error. All six ETFs average intradaily pricing deviations are negative with the exception of the FXA pricing deviation which is a positive $0.17; the rest of the ETFs pricing deviations are −0.3778 for FXB, −0.3231 for FXC, −0.2697 for FXC, −0.2697 for FXE, −0.6484 for FXF and −0.9273 for FXY. All exhibit skewness, kurtosis, very high levels of positive autocorrelation and negative trends, which suggests erosion of value. The author also found that these exchange traded funds’ arbitrage mechanism is more closely related to the exchange traded funds’ pricing deviation than tracking error.

Research limitations/implications

The paper uses high-frequency one-minute interval data in the analysis of pricing deviation which might be artificially deflating standard errors and thus inflating the t-test significance values.

Originality/value

The paper is relevant to ETF investors and contributes to the continuing search in the finance literature of better ETF performance metric.

Details

International Journal of Managerial Finance, vol. 11 no. 4
Type: Research Article
ISSN: 1743-9132

Keywords

Book part
Publication date: 16 January 2023

Philip C. Sookram

This chapter examines the current state of crypto exchange-traded funds (ETFs). It focuses on issues preventing wider implementation and specific products. ETFs have become a…

Abstract

This chapter examines the current state of crypto exchange-traded funds (ETFs). It focuses on issues preventing wider implementation and specific products. ETFs have become a popular investment vehicle that investors use to help achieve their long-term goals. A recurring theme is that regulators protect individual investors from direct exposure to cryptocurrency, which many view as highly speculative investments. Pressure from institutions and investors for a bitcoin-based ETF made progress in 2021 when Proshares, an ETF specialized investment company, debuted the first-ever bitcoin futures ETF in the United States. This event is the first-time investors could buy a fund on the New York Stock Exchange that tracks derivative futures contracts of bitcoin. This occurrence pushed this digital asset’s spot price to all-time highs, serving as a breakthrough in cryptocurrency history.

Details

The Emerald Handbook on Cryptoassets: Investment Opportunities and Challenges
Type: Book
ISBN: 978-1-80455-321-3

Keywords

Book part
Publication date: 17 January 2023

Fei Gao and Bingqiao Li

The authors examine the factors that impact the growth of exchange traded funds (ETFs) from 1990 to 2020. The authors show the first-mover and winner-takes-all effects from top…

Abstract

The authors examine the factors that impact the growth of exchange traded funds (ETFs) from 1990 to 2020. The authors show the first-mover and winner-takes-all effects from top ETF issuers. Besides the longer history and larger asset under management (AUM), the ETFs being managed by top issuers have exhibited lower risks and higher trading volume. Delisted ETFs on the contrary has a shorter history, lower AUM, higher risks, and lower trading volume. For zombie ETFs, the authors find longer history, lower risks but lower AUM and trading volume, controlled for total expense ratio, return, volatility, Amihud (2002) illiquidity, bid-ask spread, turnover ratio, as well as year, issuer, asset class and region fixed effects. The authors further study the ETFs’ AUM and trading activities over the 2008 Global Financial Crisis (GFC) and COVID-19 pandemic crisis, and find that the GFC has a significant negative impact while the COVID-19 has a positive impact on the ETFs’ popularity. The significant increase in AUM of ETF relative to common stocks during the COVID-19 is associated with retail investors’ holdings, as the authors document a significant reduction of institutional holdings at the aggregate level.

Details

Fintech, Pandemic, and the Financial System: Challenges and Opportunities
Type: Book
ISBN: 978-1-80262-947-7

Keywords

Abstract

Details

Financial Derivatives: A Blessing or a Curse?
Type: Book
ISBN: 978-1-78973-245-0

Article
Publication date: 6 June 2016

Owen Williams

The purpose of this paper is to consider the implicit effect of the underlying foreign currency exposure on the performance characteristics of country exchange traded funds.

1280

Abstract

Purpose

The purpose of this paper is to consider the implicit effect of the underlying foreign currency exposure on the performance characteristics of country exchange traded funds.

Design/methodology/approach

To arrive at an overall estimation of the exchange-traded fund (ETF)’s tracking error, the mean of the three measures of tracking error was calculated for both the hedged (r_LC) and unhedged (r_NAV) return series. Since tracking error does not capture all the risk inherent in a country index fund, the study extends the analysis using the Sortino and Modified Sharpe ratios.

Findings

The decision to hedge currency risk should not be taken on the sole basis of historical volatilities. The investor must also factor in transactions costs, the possible roll of futures contracts and prevailing interest rate differentials. If the rate on the foreign currency is greater than the dollar (euro) rate, the investor will pay for the hedge. If the rate on the foreign currency is less than the dollar (euro) rate, the investor will gain on the trade. Given that hedging entails additional costs, in cases where the neutralization of currency volatility only reduces risk modestly, it would be advisable to leave the exchange rate risk unhedged. We propose two metrics for ETF investors deciding whether to hedge a country ETF’s underlying currency risk.

Originality/value

The results highlight a key finding: while the majority of country funds accurately track the performance of the underlying foreign index when measured in the local currency, returns in the fund currency can be much more volatile. In breaking down the sources of country fund volatility, the paper demonstrates the impact of the underlying currency movements on overall fund risk. In cases where the currency impact has a significant impact on fund tracking errors, an index-oriented investor benefits from neutralizing the exchange rate effect. Additionally, as the Sortino and Modified Sharpe measures suggest that the underlying currency exposure offers in most cases a better risk-adjusted return for country exchange-traded funds (ETFs) in the listing currency, we also calculate the risk minimizing foreign currency exposure for each fund and propose a decision rule based on the net currency variance to decide whether to hedge the ETF’s currency risk. The optimal hedge ratio indicates that US-based investors should only partially hedge the underlying currency risk while European-based investors are better off fully hedging currency risk.

Details

Studies in Economics and Finance, vol. 33 no. 2
Type: Research Article
ISSN: 1086-7376

Keywords

Book part
Publication date: 16 January 2023

John Ward

This chapter discusses the current landscape for digital asset investing and the many operational risks facing cryptocurrency investors. It also discusses the ongoing progress in…

Abstract

This chapter discusses the current landscape for digital asset investing and the many operational risks facing cryptocurrency investors. It also discusses the ongoing progress in the institutionalization of digital asset investment and the risks inherent when investing in cryptocurrencies and blockchain opportunities. Investors considering investing in a public or private fund that invests in digital assets must be aware of the operational risks that may directly impact their investments, including risks from portfolio concentration, illiquidity, hacking, digital asset custody, and digital asset valuations. Operational due diligence reviews of funds and fund managers are critical in assessing operational risks for digital asset investment.

Details

The Emerald Handbook on Cryptoassets: Investment Opportunities and Challenges
Type: Book
ISBN: 978-1-80455-321-3

Keywords

Content available
Book part
Publication date: 29 January 2019

H. Kent Baker, Greg Filbeck and Halil Kiymaz

Abstract

Details

The Savvy Investor’s Guide to Pooled Investments
Type: Book
ISBN: 978-1-78973-213-9

Abstract

Details

The Savvy Investor’s Guide to Pooled Investments
Type: Book
ISBN: 978-1-78973-213-9

1 – 10 of over 35000