Analysis of the impact of an Exchange-Traded Fund share performance on the probability of closure of the Exchange-Traded Fund
(2014) BUSN88 20141Department of Business Administration
- Abstract
- The objective of this essay is to investigate if the performance of an Exchange-Traded Fund (ETF) share has an impact on the probability of closure of the same Exchange-Traded Fund. A great number of ETFs closures occurred in the last two years and the number of these closed ETFs represent a relevant percentage of the total number of ETFs that have been liquidated since this type of shares came to market two decades ago.
The analyzed sample is composed by 1459 Exchange-Traded Funds which represents all ETFs ever listed on New York Stock Exchange Arca, 1277 of 1459 are currently active ETFs and 182 are terminated ETFs (until 1 March 2014). A Probit model was employed on three time windows of 24 months and considering lags of 6, 12, 18 and... (More) - The objective of this essay is to investigate if the performance of an Exchange-Traded Fund (ETF) share has an impact on the probability of closure of the same Exchange-Traded Fund. A great number of ETFs closures occurred in the last two years and the number of these closed ETFs represent a relevant percentage of the total number of ETFs that have been liquidated since this type of shares came to market two decades ago.
The analyzed sample is composed by 1459 Exchange-Traded Funds which represents all ETFs ever listed on New York Stock Exchange Arca, 1277 of 1459 are currently active ETFs and 182 are terminated ETFs (until 1 March 2014). A Probit model was employed on three time windows of 24 months and considering lags of 6, 12, 18 and 24 months. For the binary dependent variable, the value of 1 was assigned to closed ETFs in the considered time window; the value of 0 was assigned to alive ETFs during the considered time window. The 5 explanatory variables used to represent ETF share performance were: Opening Price, Turnover, Market Value, Bid-Ask percentage spread and Dividend Yield. The choice was based on the fact that these variables are employed by studies and academic research on ETFs and other types of funds.
When considering returns and share price (Opening Price), liquidity (Turnover and Bid-Ask percentage Spread) and dividend policy (Dividend Yield), the results of the performed analysis do not find strong evidence that the stock performance of an ETF has an impact on the probability of closure of the ETF. However, the size of an ETF, represented by Market Value, has an evident but small impact: the larger market capitalization an ETF has, the less likely the ETF is to be terminated (closed). (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/4729657
- author
- Marchina, Giuseppe LU and Aybar Camposano, Paola LU
- supervisor
- organization
- course
- BUSN88 20141
- year
- 2014
- type
- H1 - Master's Degree (One Year)
- subject
- keywords
- Probit, share performance, ETF, Exchange-Traded Fund
- language
- English
- id
- 4729657
- date added to LUP
- 2014-11-03 14:04:51
- date last changed
- 2014-11-03 14:04:51
@misc{4729657,
abstract = {{The objective of this essay is to investigate if the performance of an Exchange-Traded Fund (ETF) share has an impact on the probability of closure of the same Exchange-Traded Fund. A great number of ETFs closures occurred in the last two years and the number of these closed ETFs represent a relevant percentage of the total number of ETFs that have been liquidated since this type of shares came to market two decades ago.
The analyzed sample is composed by 1459 Exchange-Traded Funds which represents all ETFs ever listed on New York Stock Exchange Arca, 1277 of 1459 are currently active ETFs and 182 are terminated ETFs (until 1 March 2014). A Probit model was employed on three time windows of 24 months and considering lags of 6, 12, 18 and 24 months. For the binary dependent variable, the value of 1 was assigned to closed ETFs in the considered time window; the value of 0 was assigned to alive ETFs during the considered time window. The 5 explanatory variables used to represent ETF share performance were: Opening Price, Turnover, Market Value, Bid-Ask percentage spread and Dividend Yield. The choice was based on the fact that these variables are employed by studies and academic research on ETFs and other types of funds.
When considering returns and share price (Opening Price), liquidity (Turnover and Bid-Ask percentage Spread) and dividend policy (Dividend Yield), the results of the performed analysis do not find strong evidence that the stock performance of an ETF has an impact on the probability of closure of the ETF. However, the size of an ETF, represented by Market Value, has an evident but small impact: the larger market capitalization an ETF has, the less likely the ETF is to be terminated (closed).}},
author = {{Marchina, Giuseppe and Aybar Camposano, Paola}},
language = {{eng}},
note = {{Student Paper}},
title = {{Analysis of the impact of an Exchange-Traded Fund share performance on the probability of closure of the Exchange-Traded Fund}},
year = {{2014}},
}