Advanced Search
MyIDEAS: Login

The efficiency of international information flow: Evidence from the ETF and CEF prices

Contents:

Author Info

  • Hughen, J. Christopher
  • Mathew, Prem G.
Registered author(s):

    Abstract

    While similar in their trading and organization, closed-end funds (CEFs) and exchange-traded funds (ETFs) differ in their liquidity and ease of arbitrage. We compare their price transmission dynamics using a sample of funds that invest in foreign securities and are most likely to show the deficiencies in the manner in which they process information. Our analysis shows that ETF returns are more closely related to their portfolio returns than are CEF returns. However, both fund types underreact to portfolio returns but overreact to domestic stock market returns. A simple trading strategy using these results is profitable with roundtrip trading costs less than 1.38% for CEFs and 0.71% for ETFs.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.sciencedirect.com/science/article/B6W4W-4VC7F1F-1/2/bfa0c3f78c759e6b727622c9b827f356
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Bibliographic Info

    Article provided by Elsevier in its journal International Review of Financial Analysis.

    Volume (Year): 18 (2009)
    Issue (Month): 1-2 (March)
    Pages: 40-49

    as in new window
    Handle: RePEc:eee:finana:v:18:y:2009:i:1-2:p:40-49

    Contact details of provider:
    Web page: http://www.elsevier.com/locate/inca/620166

    Related research

    Keywords: Exchange-traded funds Closed-end country funds Market efficiency International market integration;

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Sweeney, Richard J., 1988. "Some New Filter Rule Tests: Methods and Results," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 23(03), pages 285-300, September.
    2. Tse, Yiuman & Martinez, Valeria, 2007. "Price discovery and informational efficiency of international iShares funds," Global Finance Journal, Elsevier, vol. 18(1), pages 1-15.
    3. Geert Bekaert & Campbell R. Harvey, 2003. "Market Integration and Contagion," NBER Working Papers 9510, National Bureau of Economic Research, Inc.
    4. Pontiff, Jeffrey, 1996. "Costly Arbitrage: Evidence from Closed-End Funds," The Quarterly Journal of Economics, MIT Press, vol. 111(4), pages 1135-51, November.
    5. Peter Klibanoff & Owen Lamont & Thierry A. Wizman, 1996. "Investor Reaction to Salient News in Closed-End Country Funds," NBER Working Papers 5588, National Bureau of Economic Research, Inc.
    6. Chang, Eric & Eun, Cheol S. & Kolodny, Richard, 1995. "International diversification through closed-end country funds," Journal of Banking & Finance, Elsevier, vol. 19(7), pages 1237-1263, October.
    7. Eduardo Levy-Yeyati & Angel Ubide, 2000. "Crises, Contagion, and the Closed-End Country Fund Puzzle," IMF Staff Papers, Palgrave Macmillan, vol. 47(1), pages 3.
    8. Kim, Minho & Szakmary, Andrew C. & Mathur, Ike, 2000. "Price transmission dynamics between ADRs and their underlying foreign securities," Journal of Banking & Finance, Elsevier, vol. 24(8), pages 1359-1382, August.
    9. Olienyk, John P. & Schwebach, Robert G. & Kenton Zumwalt, J., 1999. "WEBS, SPDRs, and country funds: an analysis of international cointegration," Journal of Multinational Financial Management, Elsevier, vol. 9(3-4), pages 217-232, November.
    10. Imtiaz Mazumder, M. & Chu, Ting-Heng & Miller, Edward M. & Prather, Larry J., 2008. "International day-of-the-week effects: An empirical examination of iShares," International Review of Financial Analysis, Elsevier, vol. 17(4), pages 699-715, September.
    11. Anita K. Pennathur & Natalya Delcoure & Dwight Anderson, 2002. "Diversification Benefits of iShares and Closed-End Country Funds," Journal of Financial Research, Southern Finance Association & Southwestern Finance Association, vol. 25(4), pages 541-557.
    12. Hamao, Yasushi & Masulis, Ronald W & Ng, Victor, 1990. "Correlations in Price Changes and Volatility across International Stock Markets," Review of Financial Studies, Society for Financial Studies, vol. 3(2), pages 281-307.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. Levy, Ariel & Lieberman, Offer, 2013. "Overreaction of country ETFs to US market returns: Intraday vs. daily horizons and the role of synchronized trading," Journal of Banking & Finance, Elsevier, vol. 37(5), pages 1412-1421.

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:eee:finana:v:18:y:2009:i:1-2:p:40-49. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.