Liquidity risk and exchange-traded fund returns, variances, and tracking errors

• 成果类型: Article
• 署名作者: Bae, Kyounghun; Kim, Daejin
• 署名单位: Hanyang University; Ulsan National Institute of Science & Technology (UNIST)
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2019.02.012
• 发表日期: 2020
• 页码: 222-253
• 关键词: Exchange-traded funds (ETFs); liquidity; Tracking errors; volatility

摘要

We investigate the effect of exchange-traded fund (ETF) liquidity on ETF tracking errors, returns, and volatility in the US. We find that illiquid ETFs have large tracking errors. The effect is more pronounced when underlying assets are less liquid. Returns and liquidity of illiquid ETFs are more sensitive to underlying index returns or ETF market liquidity, or both. Thus, a positive liquidity premium exists in US ETF markets. The ETF variance could be larger than its net asst value variance owing to infrequent trading. In summary, illiquid ETFs are more likely to deviate from their underlying indexes and could be riskier than underlying portfolios. (C) 2020 Elsevier B.V. All rights reserved.