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Active Management and Price Efficiency of Exchange-traded Funds

Author

Listed:
  • Tao Chen
  • Karen H. Y. Wong
  • Masayuki Susai

Abstract

This paper extends the debate over the benefits of active management by investigating its impact on price efficiency using data from available ETFs traded on the US market. After accounting for various tests in terms of price efficiency, we find that active management matters to the efficiency improvement. One practical implication of this study is that more active management element might be considered by fund managers in designing and managing their ETFs so as to reflect all available information into fund prices.

Suggested Citation

  • Tao Chen & Karen H. Y. Wong & Masayuki Susai, 2016. "Active Management and Price Efficiency of Exchange-traded Funds," Prague Economic Papers, Prague University of Economics and Business, vol. 2016(1), pages 3-18.
    • Handle: RePEc:prg:jnlpep:v:2016:y:2016:i:1:id:533:p:3-18
    DOI: 10.18267/j.pep.533
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    More about this item

    Keywords

    price efficiency; exchange-traded funds; active management;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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