Descriptions of the selected categories of investment funds are provided in the second section of the article, together with the advantages of ETFs as opposed to mutual funds. First section presents data sources and methodological framework, with detailed description of the innovation diffusion models applied in the research (based on 3-parametric logistic curve).
logistic growth models in order to explore the key development patterns. This paper examines the changes of the investment funds (ETFs and mutual funds) in Mexico over 2002-2012 using a category of the innovation. Due to their similar investment objectives, ETFs are considered substitutes for mutual funds. The results obtained are very comprehensive and indicative of the trading behavior of the US ETFs invested in emerging market indexes.Įxchange traded funds (ETFs) are one of the most influential financial innovations, reshaping the investment funds market in many countries, including Mexico.
The issues examined concern the behavior of their return and volatility during trading and non-trading hours, their performance relative to the market performance, the correlation of emerging ETF returns with the stock market of the United States, their tracking error and the persistence in tracking error, the pricing inefficiencies in terms of deviations between the trading prices and net asset values of ETFs, the persistence in these inefficiencies which can or cannot be arbitrage-able, the reaction implications for the pricing of ETFs due to the existence of these inefficiencies, and, finally, the determinants of ETFs' trading activity. In particular, a sampkeof forty iShares listed in the United Shares and exposed to several emerging stock markets in America, Europe, Asia and South Africa is employed to study several issues surrounding the trading behavior of emerging market ETFs. Emerging markets ETFs are the subject of the current paper.
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