Are Investors Better Off Doing Nothing During Exchange-Traded Fund Closures?

39 Pages Posted: 23 Jan 2023 Last revised: 2 Nov 2023

See all articles by Ekkehart Boehmer

Ekkehart Boehmer

Singapore Management University - Lee Kong Chian School of Business

Marinela Adriana Finta

Singapore Management University

Abstract

We investigate a sample of several Exchange-Traded Funds (ETFs) that closed between 2012 and 2019. Our findings show that ETFs close after positive returns and flows. Moreover, both returns and flows are good predictors of the ETFs’ decision to close. In general, we also find that small ETFs earn greater daily returns on average than larger ETFs with the same investment objective. We finally highlight that after the closure announcement, in normal circumstances (e.g., without exposure to extra fees), investors are better off keeping calm and doing nothing while waiting to receive shares’ cash at the NAV from the ETF issuer.

Keywords: ETFs, Closure

JEL Classification: G11, G14

Suggested Citation

Boehmer, Ekkehart and Finta, Marinela Adriana, Are Investors Better Off Doing Nothing During Exchange-Traded Fund Closures?. Available at SSRN: https://ssrn.com/abstract=4328422 or http://dx.doi.org/10.2139/ssrn.4328422

Ekkehart Boehmer

Singapore Management University - Lee Kong Chian School of Business ( email )

Singapore

Marinela Adriana Finta (Contact Author)

Singapore Management University ( email )

50 Stamford Road
Singapore, 178899
Singapore

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