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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 and liquidity. For both the full sample of ETF constituents and the least liquid ETF constituents, a larger part of the variation in individual stock returns or liquidity is explained by market-wide variations. We present evidence that ETF creation and 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-04659239 , version 1 (22-07-2024)

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  • HAL Id : hal-04659239 , version 1

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Fabrice Riva, Thomas Marta. Do ETFs Increase the Commonality of their Underlying Assets? Evidence from a Switch in ETF Replication Technique. 39th Conference of the French Finance Association (AFFI), Jun 2023, Bordeaux, France. ⟨hal-04659239⟩
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