The heterogeneous volume-volatility relations in the exchange-traded fund market: evidence from China

Xu, L., Gao, H., Shi, Y. and Zhao, Y. (2020) The heterogeneous volume-volatility relations in the exchange-traded fund market: evidence from China. Economic Modelling, 85, pp. 400-408. (doi: 10.1016/j.econmod.2019.11.019)

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Abstract

We decompose the trading volume of exchange-traded funds (ETFs) into specific components according to different triggers of trades: (i) private information, (ii) disagreement among investors due to their different opinions on public information or having different information, and (iii) investor impatience. Then we examine the particular impact of each type of ETF trade on the market volatility of the tracked index. Focusing on the three ETFs tracking the CSI 300, we show that ETF trades stemming from investor disagreement are a key determinant of CSI 300 volatility, dominating other factors considered. Liquidity ETF trades can partially explain CSI 300 volatility. However, little evidence supports a significant correlation between privately informed trades of ETFs and CSI 300 volatility.

Item Type:Articles
Additional Information:Yang Zhao specially acknowledges the financial support from the National Natural Science Foundation of China (Grant No. 71801117).
Status:Published
Refereed:Yes
Glasgow Author(s) Enlighten ID:Shi, Dr Yukun
Authors: Xu, L., Gao, H., Shi, Y., and Zhao, Y.
College/School:College of Social Sciences > Adam Smith Business School > Accounting and Finance
Journal Name:Economic Modelling
Publisher:Elsevier
ISSN:0264-9993
ISSN (Online):1873-6122
Published Online:25 November 2019

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