Are US-Dollar-Hedged-ETF Investors Aggressive on Exchange Rates? A Panel VAR Approach

Shank, C. A., & Vianna, A. C. (2016). Are US-Dollar-Hedged-ETF investors aggressive on exchange rates? A panel VAR approach. Research in International Business and Finance, 38, 430-438.

21 Pages Posted: 21 May 2016 Last revised: 2 Feb 2017

See all articles by Corey A. Shank

Corey A. Shank

Dalton State College - Division of Business Administration

Andre C. Vianna

Ministry of Finance of Brazil - Santa Catarina

Date Written: May 15, 2016

Abstract

Exchange traded funds (ETFs) are a multi-trillion dollar market that epitomizes financialization due to its recent growth. This study examines the behavior of U.S. listed currency hedged ETF investors towards changes in the underlying benchmark and foreign exchange rate from July 2011 to November 2015 using a panel VAR approach. We find that investors are able to anticipate changes in future exchange rates and invest in currency hedged ETFs prior to changes. Granger-causality tests confirm that these investors proactively trade before large real exchange rate movements. These results suggest that the use of financial instruments such as ETFs to hedge against exchange rate volatility may have itself become a source of volatility, which have implications for the further financialization of the ETF industry.

Keywords: ETFs, Financialization, Trading Volume, Exchange Rates, Investor Behavior

JEL Classification: E44, F31, G11, G12

Suggested Citation

Shank, Corey and Vianna, Andre C., Are US-Dollar-Hedged-ETF Investors Aggressive on Exchange Rates? A Panel VAR Approach (May 15, 2016). Shank, C. A., & Vianna, A. C. (2016). Are US-Dollar-Hedged-ETF investors aggressive on exchange rates? A panel VAR approach. Research in International Business and Finance, 38, 430-438.. Available at SSRN: https://ssrn.com/abstract=2782082 or http://dx.doi.org/10.2139/ssrn.2782082

Corey Shank (Contact Author)

Dalton State College - Division of Business Administration ( email )

Dalton, GA 30720
United States

Andre C. Vianna

Ministry of Finance of Brazil - Santa Catarina ( email )

Rua Nunes Machado 192, Centro
Florianópolis, Santa Catarina 88010-460
Brazil

Register to save articles to
your library

Register

Paper statistics

Downloads
63
rank
338,516
Abstract Views
445
PlumX Metrics