Exchange Traded Funds 101 for Economists
55 Pages Posted: 22 Jan 2018 Last revised: 29 Jan 2018
Date Written: January 2018
Exchange-traded funds (ETFs) represent one of the most important financial innovations in decades. An ETF is an investment vehicle that trades intraday and seeks to replicate the performance of a specific index. In recent years ETFs have grown substantially in assets, diversity, and market significance. This growth reflects the rise in passive asset management where investors seek to track a benchmark index rather than outperform the market as a whole. As a consequence, there is increased attention by investors, regulators, and academics seeking to assess and understand the implications of this rapid growth. This article explains the key drivers of ETF growth and their implications for economists and policy makers.
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