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Exchange traded funds: U.S. Financial Market case study

Author

Listed:
  • Aleksandra Tkaczow

    (Faculty of Economic Sciences, University of Warsaw)

  • Krzysztof Spirzewski

    (Faculty of Economic Sciences, University of Warsaw)

Abstract

The presence of exchange traded funds (ETFs) is well recognise in many financial markets on the word since their inception in the 1990’s. The widespread interest in those are due to many advantages and confirms that it is worth investigating. The main advantages include its flexibility, and a large window of investment opportunities for retail investors and even become popular with institutional investors as well. However were introduced to the markets the main point was to provide cheaper access to passive indexed funds to individual investors. In this paper we provide the comprehensive knowledge on those funds in one particular market: the United States financial market. The aim of this research is to analyse and discuss the presence of ETFs in the financial markets. We analyse four ETFs and three indices, the results show that three out of the four ETFs are not cointegrated with the index that they track. On the other hand, correlation tests show that ETFs and its underlying index are highly correlated. The main methods of study used are integration orders of variables, cointegration vector and tests, error correction model – when it applies – all performed in R Studio. The data collection ranges between 2010 – 2019.

Suggested Citation

  • Aleksandra Tkaczow & Krzysztof Spirzewski, 2021. "Exchange traded funds: U.S. Financial Market case study," Working Papers 2021-19, Faculty of Economic Sciences, University of Warsaw.
    • Handle: RePEc:war:wpaper:2021-19
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    File URL: https://www.wne.uw.edu.pl/index.php/download_file/6636/
    File Function: First version, 2021
    Download Restriction: no
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    More about this item

    Keywords

    stock exchange; exchange traded funds; U.S. financial market;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General

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