Index trading and portfolio risk
We use data from the Oslo Stock Exchange. Our findings indicate that trading in ETFs is correlated with the return variance on a portfolio of the underlying index constituents. We also find correlation between ETF trading and the return variance on portfolios with non-constituents. The correlation between ETF trading and the return variance on the portfolio of the underlying index constituents is higher than for the other portfolios, but we cannot claim causality. We do not find similar effects from flows to index-linked mutual funds.
KeywordsETFs Index funds Portfolio return variance
JEL ClassificationsG11 G12 G23
|Funder Name||Grant Number||Funding Note|
|Norwegian Research council|