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The Use of ETFs in Internationally-Focused Mutual Fund Portfolios

Author

Listed:
  • D. Eli Sherrill

    (Illinois State University, Campus, Box 5480, Normal, IL 61790-5480, USA)

  • Sara E. Shirley

    (Middle Tennessee State University, 1301 E Main St, Murfreesboro, TN 37132, USA)

  • Jeffrey R. Stark

    (Middle Tennessee State University, 1301 E Main St, Murfreesboro, TN 37132, USA)

Abstract

We explore the implications of US-based, internationally-focused equity mutual funds holding exchange traded funds (ETFs). We observe significant differences in how ETFs are used by international mutual funds compared to their domestic equity counterparts. Internationally-focused mutual funds use ETFs to alter the return-based and country risk exposures of the mutual fund. In addition to altering the risk of the fund, we find increases in ETF-use coincide with a change in performance, an investment in a greater number of countries, and a reduction the number of direct equity holdings.

Suggested Citation

  • D. Eli Sherrill & Sara E. Shirley & Jeffrey R. Stark, 2021. "The Use of ETFs in Internationally-Focused Mutual Fund Portfolios," Quarterly Journal of Finance (QJF), World Scientific Publishing Co. Pte. Ltd., vol. 11(03), pages 1-35, September.
    • Handle: RePEc:wsi:qjfxxx:v:11:y:2021:i:03:n:s2010139221500129
    DOI: 10.1142/S2010139221500129
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