Abstract

https://ssrn.com/abstract=2865734
 


 



Exchange Traded Funds (ETFs)


Itzhak Ben-David


Ohio State University - Fisher College of Business, Finance Department; National Bureau of Economic Research (NBER)

Francesco A. Franzoni


Università della Svizzera italiana (USI), Lugano; Swiss Finance Institute

Rabih Moussawi


Villanova University - Department of Finance; University of Pennsylvania - The Wharton School

October 1, 2016

Charles A. Dice Center Working Paper No. 2016-22
Fisher College of Business Working Paper No. 2016-03-022
Swiss Finance Institute Research Paper No. 16-64

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.

Number of Pages in PDF File: 35

Keywords: ETFs, Mutual Funds, Investment Managers, Volatility, Arbitrage, Fund Flows

JEL Classification: G12, G14, G15


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Date posted: November 8, 2016 ; Last revised: November 11, 2016

Suggested Citation

Ben-David, Itzhak and Franzoni, Francesco A. and Moussawi, Rabih, Exchange Traded Funds (ETFs) (October 1, 2016). Charles A. Dice Center Working Paper No. 2016-22; Fisher College of Business Working Paper No. 2016-03-022; Swiss Finance Institute Research Paper No. 16-64. Available at SSRN: https://ssrn.com/abstract=2865734

Contact Information

Itzhak Ben-David (Contact Author)
Ohio State University - Fisher College of Business, Finance Department ( email )
2100 Neil Avenue
Fisher 700D
Columbus, OH 43210-1144
United States
773 988 1353 (Phone)
HOME PAGE: http://fisher.osu.edu/fin/faculty/Ben-David/index.htm

National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
HOME PAGE: http://fisher.osu.edu/fin/faculty/Ben-David/
Francesco A. Franzoni
Università della Svizzera italiana (USI), Lugano ( email )
Via G. Buffi 13
Lugano, 6904
Switzerland

Swiss Finance Institute
Switzerland
Rabih Moussawi
Villanova University - Department of Finance ( email )
800 E Lancaster Ave
Bartley Hall, 1003
Villanova, PA 19085
United States
University of Pennsylvania - The Wharton School ( email )
United States

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