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Are Modifications in the ETF's Investment Performance and Risks during the COVID-19 Pandemic Event?

Author

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  • Ying-Sing LIU

    (College of Humanities & Social Sciences, Chaoyang University of Technology, Taiwan)

  • Liza LEE

    (College of Humanities & Social Sciences, Chaoyang University of Technology, Taiwan)

Abstract

This study focuses on the impact of the COVID-19 pandemic on the investment performance and systematic risk of ETFs. As a result of the early stages of the COVID-19 outbreak, the impact in China was much greater than that in Taiwan. Therefore, by two ETFs investing higher weighted stocks in the Shanghai and Taiwan markets, the ETFs are used to explore the COVID-19 pandemic effect on the two stock markets. Jensen’s alpha and the modified model by Jensen (1968) are coupled with GARCH(1,1) to modify and test ETF’s performance and systematic risk. The empirical results show that ETF50 performance may be overestimated by using Jensen’s alpha. According to the results of modified Jensen's alpha, there is no evidence that abnormal returns are significantly nonzero in both ETFs and that alpha values have not been changed by the COVID-19 event. After the COVID-19 pandemic began, the SSE50 ETF’s systematic risk significantly increased, and the asset size of funds significantly decreased. Therefore, the results supported the significant impact of the COVID-19 pandemic on the SSE50 ETF. There is evidence that the SSE50 ETF affects COVID-19 events, and this result echoes the more severe areas of the COVID-19 pandemic in China

Suggested Citation

  • Ying-Sing LIU & Liza LEE, 2022. "Are Modifications in the ETF's Investment Performance and Risks during the COVID-19 Pandemic Event?," Review of Applied Socio-Economic Research, Pro Global Science Association, vol. 23(1), pages 05-17, June.
    • Handle: RePEc:rse:wpaper:v:23:y:2022:i:1:p:05-17
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    1. Yen-Chang Chen & Ying-Sing Liu, 2023. "Market Efficiency and Stock Investment Loss Aversion Guide During COVID-19 Pandemic Events: The Case for Applying Data Mining," SAGE Open, , vol. 13(4), pages 21582440231, December.

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    More about this item

    Keywords

    Cross-Border ETF; Effect of COVID-19 Pandemic; Modified Jensen’s Alpha; Systematic Risk; Investment Performance;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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