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Communication Dans Un Congrès Année : 2023

Do ETFs Increase the Commonality of their Underlying Assets? Evidence from a Switch in ETF Replication Technique

Thomas Marta
  • Fonction : Auteur

Résumé

We investigate the impact of Exchange-Traded Funds (ETFs) on the comovements of their constituent securities using a novel identication that exploits the switch from synthetic to physical replication of a large French ETF. After the switch, constituent stocks experience greater commonality, in both returns andliquidity. For both the full sample of ETF constituents and the least liquid ETFconstituents, a larger part of the variation in individual stock returns or liquidityis explained by market-wide variations. We present evidence that ETF creationand redemption is the transmission mechanism of the comovements. Moreover, we show that the comovements do not appear excessive.

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Dates et versions

hal-04659233 , version 1 (22-07-2024)

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  • HAL Id : hal-04659233 , version 1

Citer

Fabrice Riva, Thomas Marta. Do ETFs Increase the Commonality of their Underlying Assets? Evidence from a Switch in ETF Replication Technique. 14th Annual Hedge Fund Research Conference, Jan 2023, Paris, France. ⟨hal-04659233⟩
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