IDEAS home Printed from https://ideas.repec.org/a/bfr/fisrev/20182212.html
   My bibliography  Save this article

What risks do exchange-traded funds pose?

Author

Listed:
  • Grant TURNER
  • Vladyslav SUSHKO

Abstract

There has been remarkable growth in the exchange-traded fund (ETF) market over the past decade. For many investors in equities and bonds, ETFs have become a preferred investment vehicle, providing low-cost exposure to diversified portfolios through the tracking of an index, while also allowing frequent on-market trading. Notwithstanding these clear benefits to investors, ETFs may pose some market risks. Among the main risks is that heavy trading of ETFs adds to co-movement and volatility in security prices. Price dynamics in periods of stress could also be affected by investor expectations about continued high liquidity or possible impairment of the ETF primary-secondary market trading mechanism. Risks may become more acute if complex ETF structures were to grow to a bigger share of activity.

Suggested Citation

  • Grant TURNER & Vladyslav SUSHKO, 2018. "What risks do exchange-traded funds pose?," Financial Stability Review, Banque de France, issue 22, pages 133-144, April.
    • Handle: RePEc:bfr:fisrev:2018:22:12
    as

    Download full text from publisher

    File URL: https://publications.banque-france.fr/sites/default/files/medias/documents/financial_stability_review_22.pdf
    Download Restriction: no
    ---><---

    Citations

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


    Cited by:

    1. Vladyslav Sushko & Grant Turner, 2018. "The implications of passive investing for securities markets," BIS Quarterly Review, Bank for International Settlements, March.
    2. Pagano, Marco & Sánchez Serrano, Antonio & Zechner, Jozef, 2019. "Can ETFs contribute to systemic risk?," Report of the Advisory Scientific Committee 9, European Systemic Risk Board.
    3. Enrique Molina‐Muñoz & Andrés Mora‐Valencia & Javier Perote, 2021. "Backtesting expected shortfall for world stock index ETFs with extreme value theory and Gram–Charlier mixtures," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(3), pages 4163-4189, July.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bfr:fisrev:2018:22:12. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michael brassart (email available below). General contact details of provider: https://edirc.repec.org/data/bdfgvfr.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.