EXCHANGE -TRADED FUNDS: BAD NEWS, GOOD NEWS, OR NO NEWS FOR CLOSED-END FUNDS?
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Past findings on World Equity Benchmark Shares(WEBS)and their impact on closed-end funds(CEFs) cannot necessarily be generalized for different types of exchange-traded funds(ETFs). This study uses five different event dates in order to examine whether the listing of ETFs has both an immediate and a long-run impact on the market prices of similar-type CEFs. It finds that in contrast to prior expectations. the date of the listing of ETFs is not associated with a negative and statistically significant stock price reaction. Most of the negative price reaction is concentrated on the next trading day and appears to be very short-lived. The CARs surrounding the listing date and over the next 10 trading date appear quite volatile with a slight upward drift, while CARs for CEFs over the period of one year are 16.49 percent statistically significant at the 1 percent level. Overall, these findings seem to suggest that investor regard ETFs as a viable investment vehicle but not necessarily an investment alternative to CEFs. Subsequently, past findings based strictly on WEBS cannot be generalized for different types of ETFs
Abstract
Past findings on World Equity Benchmark Shares(WEBS)and their impact on closed-end funds(CEFs) cannot necessarily be generalized for different types of exchange-traded funds(ETFs). This study uses five different event dates in order to examine whether the listing of ETFs has both an immediate and a long-run impact on the market prices of similar-type CEFs. It finds that in contrast to prior expectations. the date of the listing of ETFs is not associated with a negative and statistically significant stock price reaction. Most of the negative price reaction is concentrated on the next trading day and appears to be very short-lived. The CARs surrounding the listing date and over the next 10 trading date appear quite volatile with a slight upward drift, while CARs for CEFs over the period of one year are 16.49 percent statistically significant at the 1 percent level. Overall, these findings seem to suggest that investor regard ETFs as a viable investment vehicle but not necessarily an investment alternative to CEFs. Subsequently, past findings based strictly on WEBS cannot be generalized for different types of ETFs