This study evaluates whether exchange traded funds (ETFs) threaten fnancial market stability by testing two hypotheses relating the growing importance of ETFs to increased market volatility and rising equity valuations. We estimate quantile cointegration models using Standard & Poor's 500 Index...

Purpose Passive investing has established itself as the dominant force in the world of professionally managed assets, surpassing the concept of index funds. Its meteoric rise is fueled by investors' preference for its dual benefits of strong diversification and low cost. A comprehensive study of...

We studied various fund investing options in the circular economy sector. We found that most circular economy mutual funds and exchange-traded funds charge higher fees and take higher risks than their benchmarks. However, they appear to have underperformed their benchmarks during their short...

Exchange-traded funds (ETFs) collect approximately 7% of all U.S. corporate dividends, which they are required to redistribute to investors. How do the funds manage these dividend flows, and does such management have spillover effects on other financial markets? In this paper, we document a new...

Extant research provides evidence for financial innovation’s contribution to market efficiency by documenting that hedge funds which bet on positive earnings surprises manage their sector risk by shorting industry exchange-traded funds (ETFs). We add to this literature by considering a...

One of the most important factors to control for the achievements of investment portfolio returns is risk. If we only think that a 100% positive return is needed to recover a portfolio loss of 50%, we can understand why. With the advent of the exponential growth of technology usage in markets,...

Can ETFs trigger fire sales in illiquid assets? We develop and empirically examine a model where an authorized participant (AP) holds bond inventory and connects the ETF to the underlying bond market. For redemptions, the AP acts as a buffer between the two markets, holding redeemed bonds to...

We examine return connectedness between the largest US-based oil and gold ETFs and three major travel & leisure ETFs. Such analysis provides substantial value when understanding how investors can diversify sectoral risk. This research also compares several portfolio strategies to explore the...

This study uses a sample of 72 passively managed equity exchange-traded funds (ETFs) from the Chinese A-share market to examine the size and time-varying characteristics of their tracking errors, identify their determinants, and gain insight into the persistent and positive excess returns of...

This study examines the profitability of short-selling strategies of different portfolios with varying combinations of bull and bear Leveraged Exchange-Traded Funds (LETFs). We find that while short-selling the combination of both bull and bear LETFs does not yield significant positive returns...

The growing reliance on ETFs, especially for those ETFs being redeemed in cash, has raised concerns about their resilience to a market downturn. We show that abrupt redemptions of cash-redeemable ETFs may occur during a market downturn. In particular, an initial redemption shock to ETFs with a...

This study examines the tracking performance of 31 eurozone sovereign debt exchange traded index funds (ETFs) during 2007-2010. The tracking performance is assessed by four different tracking error models. Overall, funds underperform their respective benchmarks. Active returns (net of fees) vary...

This paper investigates the impact of growing ownership of fixed-income ETFs and mutual funds on the commonality in liquidity across corporate bonds. The unpredictability of liquidity demands inherent in these funds can prompt correlated trading among underlying illiquid bonds. The empirical...

In this study, we use high-frequency microstructure components to explore commodity ETF herding. We employ a new GARCH model incorporating cross-sectional and market volatility at 15-, 30-, 45-, and 60-minute intervals. We document that during market instability and the COVID-19 pandemic,...

The primary market of many US registered ETFs exhibits an oligopolistic structure, which is shown to have relevant implications for the pricing efficiency of those financial products. I show that the entry of an additional Authorized Participant (AP) corresponds to a decrease in the magnitude of...

We investigate how accurate leveraged and inverse ETFs are in delivering their intended single-day returns and add much-needed context to the analysis of leveraged ETF performance. We demonstrate that these funds exhibit predictable deviations in returns relative to their target and design a...

We document an improvement in analysts’ forecast accuracy following increased sector ETF ownership. We identify a possible channel for this result, i.e., because ETFs are more informative with respect to industry-level information, analysts learn directly and efficiently from ETFs about this...

This article examines the risk-related financial performance for ESG (Environmental, Social, and Governance) through the investments of ETFs. We employ Oil & Gas ETFs as a benchmark. We introduce the Value-at-Risk (VaR) and modified Sharpe Ratio based on such measurement as representative of...

In this study, I examined the daily risk-adjusted excess performance of active Equity ETFs in the Korean market, categorizing them into total market ETFs, sector ETFs, and ESG ETFs. I found statistically significant daily excess performance in certain ETFs within total market ETFs and sector...

The Korean ETF market has shown remarkable growth. ETFs, which are low-cost, diversified, and highly convenient investment products, have recorded a high average annual growth of 33% since their introduction in Korea. The growth rates surpass those of global ETF markets in terms of both market...

How much of a difference do smart trading strategies, stock choice, and lending securities to short sellers reduce the net expenses of Vanguard’s index ETFs below their reported expense ratios? Using Vanguard’s reported returns for their index ETFs and their benchmarks I discover the return...

Using non-parametric estimates with imposing inequality restrictions, we study returns and risks of green and brown portfolios constructed from fossil fuel and clean energy ETFs. The green portfolios do not unconditionally outperform brown ones, but the outperformance of green portfolios is...

The Taiwan government relaxed the liquidation exemption rule for one oil ETF when this ETF faced delisting in the oil price crisis of 2020 due to COVID-19. However, this event attracted even more investors to purchase this ETF, and such strong demand increased its issue size and premium to...

We study the interaction between ETF rebalancing and hedge fund “front-running” trades and its implications for the capital market. First, we document that ETF rebalancing has a strong negative relation with future stock returns. Second, we observe that hedge funds gradually increase...

This paper investigates the impact of ETF ownership on seasoned equity offerings (SEOs). We find that increases to firms’ ETF ownership is positively related to their propensity to conduct an SEO. ETF ownership is also associated with less negative SEO announcement returns, smaller discounts,...

The Principles for Responsible Investment (PRI) affected the financial markets since the year 2000. Asset managers and investors consider Exchange Traded Funds (ETFs) as a popular investment vehicle which represents a source of growth for sustainable strategies. Clean Energy ETFs (CE ETF) are...

This study evaluates the performance of United States (US) and European Exchange Traded Funds (ETFs) using the non-oriented version of the base point-slack-based measure (BP-SBM) Data Envelopment Analysis (DEA) model, which allows for handling negative data that can arise in some of the metrics...

Since the first exchange-traded fund began trading in 1993, the ETF form has attracted enormous investment flows. However, this triumph of the ETF has been overwhelmingly limited the world of passive investment. Due to a mix of recent market innovation and regulatory change, this state of...

Using a unique and extensive dataset of 121 socially responsible investing (SRI) equity exchange-traded funds (ETFs) from January 2010 to December 2020, this study examines how passive SRI ETFs perform compared with their non-SRI benchmarks composed of S&P500 ETFs. Over the full sample period,...

We show that exchange traded funds (ETFs) are used in a new form of insider trading known as “shadow trading.” Our evidence suggests that some traders in possession of material non-public information about upcoming M&A announcements trade in ETFs that contain the target stock, rather than...

This paper examines the causes and consequences of hedge fund investments in exchange traded funds (ETFs) using U.S. data from 1998 to 2018. The data indicate that transient hedge funds and quasi-indexer hedge funds are substantially more likely to invest in ETFs. Unexpected hedge fund inflows...