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Are ETFs Bad for Financial Health?

Title data

Baumann, Michael Heinrich ; Baumann, Michaela ; Herz, Bernhard:
Are ETFs Bad for Financial Health?
In: Chodnicka-Jaworska, Patrycja (ed.): 18th RSEP International Economics, Finance & Business Conference : Conference Proceedings. - Ankara : BC Publishing , 2020 . - pp. 10-18
ISBN 978-605-06961-5-8

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Exchange-traded Funds (ETFs) are easy to understand, cost-efficient, and liquid investment vehicles that have become very popular for various types of investors. They are important vehicles in the current trend towards passive investment strategies that make it easy to passively track market indices such as the S&P 500. The dynamics of the index and its underlying assets are closely interlinked based on the rebalancing effect and depend among others on the different types of traders in the market, price trends in individual stocks and the overall market, as well as over- or undervaluation of individual stocks and the index. Investing in an index of assets via an ETF can generate quite complex and sometimes counterintuitive investment behaviors on the level of individual assets. Seemingly stabilizing investment strategies on the level of the ETF, such as a fundamentalist approach, might actually destabilize on the level of individual stocks. Given the dramatic growth of ETFs financial regulators increasingly ponder on potential effects on market governance and financial stability.

Further data

Item Type: Article in a book
Refereed: Yes
Keywords: Exchange-traded Funds; ETF; index fund; financial stability; trading behavior
Subject classification: JEL classification codes: D01, G10, G11
Institutions of the University: Faculties > Faculty of Mathematics, Physics und Computer Science > Department of Mathematics > Chair Mathematics V (Applied Mathematics)
Faculties > Faculty of Law, Business and Economics > Department of Economics > Chair Economics I - International Economics and Finance > Chair Economics I - International Economics and Finance - Univ.-Prof. Dr. Bernhard Herz
Profile Fields > Advanced Fields > Nonlinear Dynamics
Research Institutions > Research Centres > Forschungszentrum für Modellbildung und Simulation (MODUS)
Faculties
Faculties > Faculty of Mathematics, Physics und Computer Science
Faculties > Faculty of Mathematics, Physics und Computer Science > Department of Mathematics
Faculties > Faculty of Law, Business and Economics
Faculties > Faculty of Law, Business and Economics > Department of Economics
Faculties > Faculty of Law, Business and Economics > Department of Economics > Chair Economics I - International Economics and Finance
Profile Fields
Profile Fields > Advanced Fields
Research Institutions
Research Institutions > Research Centres
Result of work at the UBT: Yes
DDC Subjects: 300 Social sciences > 330 Economics
500 Science > 510 Mathematics
Date Deposited: 27 Oct 2020 13:33
Last Modified: 27 Oct 2020 13:33
URI: https://eref.uni-bayreuth.de/id/eprint/58755

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