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Index trading and portfolio risk

Author

Listed:
  • Joakim Kvamvold

    (Norwegian University of Science and Technology)

  • Snorre Lindset

    (Norwegian University of Science and Technology)

Abstract

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.

Suggested Citation

  • Joakim Kvamvold & Snorre Lindset, 2017. "Index trading and portfolio risk," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 41(1), pages 78-99, January.
    • Handle: RePEc:spr:jecfin:v:41:y:2017:i:1:d:10.1007_s12197-015-9334-6
    DOI: 10.1007/s12197-015-9334-6
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    References listed on IDEAS

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