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Financial Stability and Actively Traded Exchange-Traded Funds

Title data

Baumann, Michael Heinrich ; Baumann, Michaela ; Herz, Bernhard:
Financial Stability and Actively Traded Exchange-Traded Funds.
Event: 26th Annual International Conference on Macroeconomic Analysis and International Finance (ICMAIF) , 26-28 May 2022 , University of Crete, Rethymno, Greece.
(Conference item: Conference , Speech )

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Abstract in another language

Exchange Traded Funds (ETFs) have seen spectacular growth over the recent decades. Although mainly perceived as passive investment vehicles, they are also used in active investment strategies. We investigate the financial market effects of ETFs in a heterogeneous agent model which is calibrated to historical data. We consider four trader types, namely fundamentalists and trend followers who either trade ETFs or the underlying individual stocks. The complex interactions of investment strategies and the availability of ETFs generate interesting nonlinearities for typical market metrics such as volatility, price correlations, mispricing, and bubbles. Our key findings are that the impact of the shares of ETF traders and of chartists on the market metrics is non-linear, esp. the influence of ETF usage on the correlation of stock prices and their fundamentals as well as on the likelihood of bubbles is hill-shaped.

Further data

Item Type: Conference item (Speech)
Refereed: Yes
Keywords: Exchange-traded Funds; ETF; Index Fund; Financial Stability; Trading Behavior; Heterogeneous Agent Model; Agent-based Model; Passive Investment
Subject classification: JEL codes C63, D01, G10, G11, G40
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)
Result of work at the UBT: Yes
DDC Subjects: 300 Social sciences > 330 Economics
500 Science > 510 Mathematics
Date Deposited: 09 Aug 2022 06:51
Last Modified: 09 Aug 2022 06:51
URI: https://eref.uni-bayreuth.de/id/eprint/71427