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Tracing Financial Innovations Diffusion And Substitution Trajectories. Recent Evidence On Exchange Traded Funds In Japan And South Korea

Author

Listed:
  • Adam Marszk

    (Gdansk University of Technology, Gdansk, Poland)

  • Ewa Lechman

    (Gdansk University of Technology, Gdansk, Poland)

Abstract

Similar to economic growth, the process of technology diffusion may well be approximated by easily Exchange Traded Funds (ETFs) are recognized financial innovations pervasively impacting and transforming financial markets (Deville 2008, Gastineau 2010, Agapova 2011, Hill et al. 2015). Easy to use they have gained rapidly growing popularity among investors (Gastineau 2010, Lechman and Marszk 2015). Asian countries are those where rapid spread of financial innovations is observed (Marszk 2014); hence our analysis covers Japan and South Korea, which allows comparing diffusion and substitution trajectories of innovative financial products between advanced and emerging economy. It also traces substitution effects between ETFs and index derivatives. Moreover, we claim that ETFs influence financial systems in various ways, and may impact their stability, due to e.g. liquidity risk (Kosev and Williams 2011, Foucher and Gray 2014), and this also constitutes a field of our research. Our research contributes to the present state of knowledge by:Tracing diffusion trajectories of financial innovations (ETFs) and examination of the dynamics of the process, across Japanese and South Korean stock exchanges;Examining the unique process of substitution between ETFs and similar investment options, i.e. stock index futures and options;Providing long-term predictions of financial innovations development across examined countries: trying to establish the possible future path of the ETF markets development in countries in scope;Examination of the impact of the ETFs on the financial systems in examined countries; identification of country-specific thresholds leading to emergence of possible threats for the financial system stability.

Suggested Citation

  • Adam Marszk & Ewa Lechman, 2016. "Tracing Financial Innovations Diffusion And Substitution Trajectories. Recent Evidence On Exchange Traded Funds In Japan And South Korea," GUT FME Working Paper Series A 32, Faculty of Management and Economics, Gdansk University of Technology.
    • Handle: RePEc:gdk:wpaper:32
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    References listed on IDEAS

    as
    1. Giovanni Dosi & Richard R. Nelson, 2000. "An Introduction to Evolutionary Theories in Economics," Chapters, in: Innovation, Organization and Economic Dynamics, chapter 11, pages 327-346, Edward Elgar Publishing.
    2. Geroski, P. A., 2000. "Models of technology diffusion," Research Policy, Elsevier, vol. 29(4-5), pages 603-625, April.
    3. Lechman, Ewa & Marszk, Adam, 2015. "ICT technologies and financial innovations: The case of exchange traded funds in Brazil, Japan, Mexico, South Korea and the United States," Technological Forecasting and Social Change, Elsevier, vol. 99(C), pages 355-376.
    4. Ewa Lechman, 2015. "ICT Diffusion in Developing Countries," Springer Books, Springer, edition 127, number 978-3-319-18254-4, October.
    5. Srichander Ramaswamy, 2011. "Market structures and systemic risks of exchange-traded funds," BIS Working Papers 343, Bank for International Settlements.
    6. Laurent Deville, 2008. "Exchange Traded Funds: History, Trading and Research," Post-Print halshs-00162223, HAL.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    ETFs; financial innovations; financial substitution;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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