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- Title
Relative Liquidity, Fund Flows and Short‐Term Demand: Evidence from Exchange‐Traded Funds.
- Authors
Broman, Markus S.; Shum, Pauline
- Abstract
Abstract: We show that highly liquid Exchange‐Traded Funds (ETFs), especially those that are more liquid than their underlying basket of securities (i.e., positive relative liquidity), are particularly attractive to investors. Using three definitions of liquidity, we find that relative liquidity predicts net fund flows, as well as inflows and outflows positively and significantly. We further document a liquidity clientele among institutional investors: (i) relative liquidity is significantly more important for short‐ than for long‐term investors; and (ii) relative liquidity is inversely related to investors’ average holding duration in the ETFs. These two findings provide evidence that relative liquidity encourages short‐term demand.
- Subjects
LIQUIDITY (Economics); EXCHANGE traded funds; SECURITIES; INVESTORS; INSTITUTIONAL investments
- Publication
Financial Review, 2018, Vol 53, Issue 1, p87
- ISSN
0732-8516
- Publication type
Article
- DOI
10.1111/fire.12159