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China's Exchange Traded Fund: Is There a Trading Place Bias?

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Author Info

  • Louis T. W. Cheng

    ()
    (School of Accounting and Finance, Hong Kong Polytechnic University, Hung Hom, Kowloon, Hong Kong)

  • Hung-Gay Fung

    ()
    (College of Business Administration, University of Missouri St. Louis, One University Plaza, St. Louis, Missouri 63121-4499, USA)

  • Yiuman Tse

    ()
    (College of Business, University of Texas–San Antonia, 501 West Durango Blvd., San Antonio, Texas 78207, USA)

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    Abstract

    We use Granger causality tests and an EGARCH model to analyze the pricing relations in the US between two exchange traded funds, the iShares FTSE/Xinhua China 25 Index (FXI) and the S&P 500 Index Fund (IVV). Daily data indicates that Hong Kong home market basically drives the FXI returns in the US. In case of intraday analysis, the US-based IVV appears to dominate the pricing of the FXI. The evidence supports the speculative pricing hypothesis that the location of trading has stronger effects than the influence of domestic effects summarized by FXI's lagged returns.

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    Bibliographic Info

    Article provided by World Scientific Publishing Co. Pte. Ltd. in its journal Review of Pacific Basin Financial Markets and Policies.

    Volume (Year): 11 (2008)
    Issue (Month): 01 ()
    Pages: 61-74

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    Handle: RePEc:wsi:rpbfmp:v:11:y:2008:i:01:p:61-74

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    Related research

    Keywords: Exchange traded funds; China market; Granger causality tests; EGARCH model; JEL Classification: F21; JEL Classification: F36; JEL Classification: G15;

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    Cited by:
    1. Wang, Xue & Yao, Lee J. & Fang, Victor, 2013. "Stock prices and the location of trade: Evidence from China-backed ADRs," The North American Journal of Economics and Finance, Elsevier, vol. 26(C), pages 677-688.
    2. Kao, Erin H. & Fung, Hung-Gay, 2012. "Intraday trading activities and volatility in round-the-clock futures markets," International Review of Economics & Finance, Elsevier, vol. 21(1), pages 195-209.

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