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- Title
Investigating the Informational Efficiency of Exchange Traded Funds (ETFs) : Empirical evidence from Indian Equity ETFs.
- Authors
KAUR, PRABHDEEP; SINGH, JASPAL
- Abstract
The study examines the relationship between the equity exchange traded funds (ETFs) listed at National Stock Exchange (NSE) of India and their corresponding spot indices. Estimates obtained from vector error correction model (VECM), Gonzalo Granger component shares (CS) and Hasbrouck information shares (IS) demonstrate that ETFs and spot indices are cointegrated in the long run with the movements in spot prices leading those of the ETF prices. The study also provides a glimpse of threshold cointegration test i.e. Gregory-Hansen (1996) statistics that tests the null hypothesis of no cointegration after allowing for a one-time regime shift in the model. Analysis suggests that profitable opportunities can be derived by forming strategies for ETFs by using past values of spot prices. Illiquidity, unawareness among the general public and reluctance on part of financial managers to promote passively managed funds have been identified as the probable reasons for the inefficiency observed in ETF prices.
- Subjects
NATIONAL Stock Exchange of India Ltd.; EXCHANGE traded funds; SPOT prices; STOCK exchanges; NULL hypothesis
- Publication
Finance India, 2022, Vol 36, Issue 1, p193
- ISSN
0970-3772
- Publication type
Article