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ETF liquidation determinants

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  • Sherrill, D. Eli
  • Stark, Jeffrey R.

Abstract

The exchange-traded fund (ETF) market has dramatically increased in size and influence. With this growth, there has been an increase in the number of liquidations. We find that the decision to liquidate an ETF is primarily based on ETF characteristics; however, we observe additional considerations related to fund family and investment objective characteristics. Failures are more likely to occur when an ETF is small and when it is launched by a struggling family or into a struggling investment objective. We find fund, family, and market characteristics at the time of creation greatly impact an ETF’s likelihood of survival. Furthermore, we observe few, but significant, differences between the decision to close an ETF and the decision to close an actively managed mutual fund. Whereas ETFs show relatively greater dependence on the well-being of their investment objective, mutual funds show a greater dependence on their fund specific performance.

Suggested Citation

  • Sherrill, D. Eli & Stark, Jeffrey R., 2018. "ETF liquidation determinants," Journal of Empirical Finance, Elsevier, vol. 48(C), pages 357-373.
    • Handle: RePEc:eee:empfin:v:48:y:2018:i:c:p:357-373
    DOI: 10.1016/j.jempfin.2018.07.007
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    Cited by:

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    2. Laura Fabregat-Aibar & Maria-Teresa Sorrosal-Forradellas & Glòria Barberà-Mariné & Antonio Terceño, 2021. "Can Artificial Neural Networks Predict the Survival Capacity of Mutual Funds? Evidence from Spain," Mathematics, MDPI, vol. 9(6), pages 1-10, March.
    3. Lee, Chien-Chiang & Chen, Mei-Ping, 2020. "Do natural disasters and geopolitical risks matter for cross-border country exchange-traded fund returns?," The North American Journal of Economics and Finance, Elsevier, vol. 51(C).
    4. Sant’Anna, Leonardo Riegel & Righi, Marcelo Brutti & Müller, Fernanda Maria & Guedes, Pablo Cristini, 2022. "Risk measure index tracking model," International Review of Economics & Finance, Elsevier, vol. 80(C), pages 361-383.
    5. Rakowski, David & Shirley, Sara, 2020. "What drives the market for exchange-traded notes?," Journal of Banking & Finance, Elsevier, vol. 111(C).

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    More about this item

    Keywords

    Exchange-traded fund; Liquidation; Fund closure;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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