Liquidity and Risk Sharing Benefits from Opening an ETF Market with Liquidity Providers: Evidence from the CAC 40 Index
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31 décembre 2014
- handle: 10670/1.o9k6v1
- halshs: halshs-00997859
- doi: 10.1016/j.irfa.2014.04.003
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info:eu-repo/semantics/altIdentifier/doi/10.1016/j.irfa.2014.04.003
Mots-clés
Exchange-traded fund (ETF) index trading transaction costs liquidity risk sharing G - Financial Economics/G.G1 - General Financial Markets/G.G1.G11 - Portfolio Choice • Investment Decisions G - Financial Economics/G.G1 - General Financial Markets/G.G1.G12 - Asset Pricing • Trading Volume • Bond Interest Rates G - Financial Economics/G.G1 - General Financial Markets/G.G1.G14 - Information and Market Efficiency • Event Studies • Insider Trading G - Financial Economics/G.G2 - Financial Institutions and Services/G.G2.G23 - Non-bank Financial Institutions • Financial Instruments • Institutional InvestorsSujets proches
Trading, Stock Common stocks Stock offerings Stock issues Equity financing Stock trading Common shares Equity capital Shares of stock Equities Financial intermediaries Lending institutionsCiter ce document
Rudy de Winne et al., « Liquidity and Risk Sharing Benefits from Opening an ETF Market with Liquidity Providers: Evidence from the CAC 40 Index », HAL-SHS : économie et finance, ID : 10.1016/j.irfa.2014.04.003
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Résumé
This article examines how the introduction of an ETF replicating a stock index impacts on the liquidity of the underlying stocks when the ETF market involves liquidity providers (LPs). We find that index stock spreads decline, relative to those of non-index stocks, after the introduction of the ETF but this liquidity improvement is not driven by changes in adverse selection costs or recognition effects. By contrast, we show that it is mainly explained by a decrease in order processing and order imbalance costs. This most probably results from additional risk sharing capacities provided by increased cross-market trading and LPs' liquidity provision in low-liquidity times.