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Utifrån en historisk jämförelse av de tre äldsta svenska ETFerna undersöker vi huruvida svensknoterade ETFer är en bättre placeringsstrategi än aktivt förvaltade Sverigefonder. Studien genomförs med de fyra utvärderingsmåtten Sharpe Ratio, Treynor Ratio, Jensen’s alfa samt Information Ratio för att se om ETFer ger högre riskjusterad avkastning än jämförbara aktivt förvaltade Sverigefonder. De tre ETFerna, XACT OMXS30, XACT OMXSB och XACT OMXSBULL jämförs mot samtliga aktivt förvaltade Sverigefonder som har som strategi att investera i stora bolag listade på Stockholmsbörsen. Samtliga utvärderingsmått ger tvetydiga resultat men två av de undersökta ETFerna visar sig ha genererat högre riskjusterad överavkastning än de jämförda fonderna. ETFernas överavkastning kan inte statistiskt säkerställas och bör därför tolkas med försiktighet. Vår undersökning indikerar dock att det kan vara mer fördelaktigt för privata investerare som värdesätter hög likviditet och aktierelaterade egenskaper att investera i ETFer framför aktivt förvaltade fonder.

Exchange traded funds (ETFs) have increased significantly in popularity since they were first introduced in 1993. However, there is still much that is unknown about ETFs in the extant literature. This dissertation attempts to fill gaps in the ETF literature by using three related essays. In these three essays, we compare ETFs to closed ended mutual funds (CEFs) by decomposing the bid-ask spread into its three components; we look at the intraday shape of ETFs and compare it to the intraday shape of equities as well as examine the co-integration factor between ETFs on the London Stock Exchange and the New York Stock Exchange; we also examine the differences between leveraged ETFs and unleveraged ETFs by analyzing the impact of liquidity and volatility. These three essays are presented in Chapters 1, 2, and 3, respectively. Chapter one uses the Huang and Stoll (1997) model to decompose the bid-ask spread in CEFs and ETFs for two distinct periods—a normal and a volatile period. We show a higher adverse selection component for CEFs than for ETFs without regard to volatility. However, both ETFs and CEFs increased in magnitude of the adverse selection component in the period of high volatility. Chapter two uses a mix of the Werner and Kleidon (1993) and the Hupperets and Menkveld (2002) methods to get the intraday shape of ETFs and analyze co-integration between London and New York trading. We find two different shapes for New York and London ETFs. There also appears to be evidence of co-integration in the overlapping two-hour trading period but not over the entire trading day for the two locations. The third chapter discusses the new class of ETFs called leveraged ETFs. We examine the liquidity and depth differences between unleveraged and leveraged ETFs at the aggregate level and when the leveraged ETFs are classified by the leveraged multiples of -3, -2, -1, 2, and 3, both for a normal and a volatile period. We find distinct differences between leveraged and unleveraged ETFs at the aggregate level, with leveraged ETFs having larger spreads than unleveraged ETFs. Furthermore, while both leveraged and unleveraged ETFs have larger spreads in high volatility, for the leveraged ETFs the change in magnitude is significantly larger than for the unleveraged ETFs. Among the multiples, the -2 leveraged ETF is the most pronounced in its liquidity characteristics, more so in volatile times.

Since the end of October 2010, the Bank of Japan has been pursuing a new Asset Purchase Programme, which includes, among other things, direct intervention in the domestic stock market through the purchase of exchange-traded funds. This research study evaluated the impact of the Bank of Japan’s exchange-traded fund purchase programme on market returns using an event study methodology. An investigation into a sample of 33 intervention events in the Nikkei 400 exchangetraded fund and 303 intervention events in the Nikkei 225 exchange-traded fund, found that the average abnormal one-day return is -1.36% for the Nikkei 400 exchange-traded fund and -1.39% for the Nikkei 225 exchange-traded fund, while the average abnormal five-day return is -0.63% and -1.11% for each exchange-traded fund respectively. Due to the high volatility, statistically the returns are indistinguishable from zero. However, this study presents evidence that the Bank of Japan intervenes predominantly during large decreases in the market. Hence, there is suggestive evidence that the Bank of Japan’s policy is effective at reducing market losses, but is not extensive enough to significantly increase returns.

The diploma thesis focuses on the specification of suitability of legal entities to invest in securities "Exchange Traded Funds" in the current conditions of the Czech Republic. The results of the thesis serve to present alternative, modern ways to invest surplus money and get a new yield. Conclusions can be used by senior management of designated legal entities.

Increasing sophistication of exchange traded fund (ETF) indexation methods required that a comparison be drawn between various methodologies. A performance and risk evaluation of four pre-selected ETF indexation categories were conducted to establish the diversification benefits that each contain. Fundamentally weighted, equally weighted and leveraged ETFs were compared to traditional market capitalisation weighted ETFs on the basis of risk and return. While a literature review presented the theory on ETFs and the various statistical measures used for this study, the main findings were obtained empirically from a sample of South African and American ETFs. Several risk-adjusted performance measures were employed to assess the risk and return of each indexation category. Special emphasis was placed on the Omega ratio due to the unique interpretation of the return series‟ distribution characteristics. The risk of each ETF category was evaluated using the exponentially weighted moving average (EWMA), while the diversification potential was determined by means of a regression analysis based on the single index model. According to the findings, fundamentally weighted ETFs perform the best during an upward moving market when compared by standard risk-adjusted performance measures. However, the Omega ratio analysis revealed the inherent unsystematic risk of alternatively indexed ETFs and ranked market capitalisation weighted ETFs as the best performing category. Equal weighted ETFs delivered consistently poor rankings, while leveraged ETFs exhibited a high level of risk associated with the amplified returns of this category. The diversification measurement concurred with the Omega ratio analysis and highlighted the market capitalisation weighted ETFs to be the most diversified ETFs in the selection. Alternatively indexed ETFs consequently deliver higher absolute returns by incurring greater unsystematic risk, while simultaneously reducing the level of diversification in the fund. / MCom (Risk Management), North-West University, Vaal Triangle Campus, 2014

Increasing sophistication of exchange traded fund (ETF) indexation methods required that a comparison be drawn between various methodologies. A performance and risk evaluation of four pre-selected ETF indexation categories were conducted to establish the diversification benefits that each contain. Fundamentally weighted, equally weighted and leveraged ETFs were compared to traditional market capitalisation weighted ETFs on the basis of risk and return. While a literature review presented the theory on ETFs and the various statistical measures used for this study, the main findings were obtained empirically from a sample of South African and American ETFs. Several risk-adjusted performance measures were employed to assess the risk and return of each indexation category. Special emphasis was placed on the Omega ratio due to the unique interpretation of the return series‟ distribution characteristics. The risk of each ETF category was evaluated using the exponentially weighted moving average (EWMA), while the diversification potential was determined by means of a regression analysis based on the single index model. According to the findings, fundamentally weighted ETFs perform the best during an upward moving market when compared by standard risk-adjusted performance measures. However, the Omega ratio analysis revealed the inherent unsystematic risk of alternatively indexed ETFs and ranked market capitalisation weighted ETFs as the best performing category. Equal weighted ETFs delivered consistently poor rankings, while leveraged ETFs exhibited a high level of risk associated with the amplified returns of this category. The diversification measurement concurred with the Omega ratio analysis and highlighted the market capitalisation weighted ETFs to be the most diversified ETFs in the selection. Alternatively indexed ETFs consequently deliver higher absolute returns by incurring greater unsystematic risk, while simultaneously reducing the level of diversification in the fund. / MCom (Risk Management), North-West University, Vaal Triangle Campus, 2014

In this thesis we consider three different problems in the domain of portfolio optimisation. The first problem we consider is that of selecting an Absolute Return Portfolio (ARP). ARPs are usually seen as financial portfolios that aim to produce a good return regardless of how the underlying market performs, but our literature review shows that there is little agreement on what constitutes an ARP. We present a clear definition via a three-stage mixed-integer zero-one program for the problem of selecting an ARP. The second problem considered is that of designing a Market Neutral Portfolio (MNP). MNPs are generally defined as financial portfolios that (ideally)exhibit performance independent from that of an underlying market, but, once again, the existing literature is very fragmented. We consider the problem of constructing a MNP as a mixed-integer non-linear program (MINLP) which minimises the absolute value of the correlation between portfolio return and underlying benchmark return. The third problem is related to Exchange-Traded Funds (ETFs). ETFs are funds traded on the open market which typically have their performance tied to a benchmark index. They are composed of a basket of assets; most attempt to reproduce the returns of an index, but a growing number try to achieve a multiple of the benchmark return, such as two times or the negative of the return. We present a detailed performance study of the current ETF market and we find, among other conclusions, constant underperformance among ETFs that aim to do more than simply track an index. We present a MINLP for the problem of selecting the basket of assets that compose an ETF, which, to the best of our knowledge, is the first in the literature. For all three models we present extensive computational results for portfolios derived from universes defined by S&P international equity indices with up to 1200 stocks. We use CPLEX to solve the ARP problem and the software package Minotaur for both our MINLPs for MNP and an ETF.

Thesis advisor: Ronnie Sadka / In the first essay of this dissertation, I study the impact that hedge fund manager connections have on investment ideas. I find that hedge fund managers who previously worked at the same prior hedge fund invest more similarly, hold more overlapping portfolios, and trade and overweight the same stocks relative to managers who do not share an employment connection. Overall, these results support theoretical prediction that networked managers share ideas that leads to price discovery for commonly held stocks. The second essay analyzes the role of ETFs in mutual fund families and is joint work with Caitlin Dannhauser. We study mutual fund and ETF twins - index funds from the same family that follow the same benchmark. We find that mutual fund twins have lower overall tax burdens while ETF twins have higher long-term yields and unrealized capital gains, but are compensated with lower expense ratios. Fund families benefit because twin offerings generate higher flows than their non-twin peers. These results support previous research that mutual fund families use diversification and subsidization to benefit the overall family. In the third essay, I study the use of latent factors in explaining hedge fund returns. Using an alternative latent factor estimator, asymptotic principal components (APC), I find explains more of the common variation of hedge fund returns on average and does so with greater efficiency than that found in the literature. I also identify an increase in the common variation across hedge fund excess return in the time-series via the extracted latent factors. My results suggest an impetus for future researchers to employ APC factors when characterizing hedge fund performance. / Thesis (PhD) — Boston College, 2017. / Submitted to: Boston College. Carroll School of Management. / Discipline: Finance.

Thesis advisor: Pierluigi Balduzzi / Thesis advisor: Jonathan Reuter / In the first essay of this dissertation, I study the impact of fund redemptions and resulting sell-offs on corporate bond yields. To control for unobserved changes in fundamentals, I study within-issuer variation of yield changes, resulting from differential exposure to redemptions and sell-offs. In contrast to previous findings for equity funds, I find no evidence indicating that bond funds destabilize the corporate bond market by moving prices beyond fundamental values. I attribute this finding to bond fund management. Although I find that investors demonstrate a bank-run like behavior, which is a potential source of destabilization, bond fund managers hold a significant level of liquid assets, allowing them to manage redemptions without excessively liquidating corporate bonds. Second essay of this dissertation looks at corporate bond Exchange Traded Funds (ETFs) which are a new form of financial innovation. Since these investment vehicles are relatively new, little is known about their risks. In this paper, we study an event in the summer 2013, knows as the Taper Tantrum, when bond ETFs and mutual funds experienced massive unexpected outflows due to speculations about interest rate hikes. We find that ETF outflows during the Taper Tantrum lead to a significant increase in exposed corporate bond yields. The increase in yields lasts for seven months, which indicates a temporary fire sale effect. In contrast, we find no fire sale effect resulting from mutual fund outflows. We attribute this contrasting finding between the two vehicles to differences in portfolio construction and investor sensitivities. Finally, we study arbitrage opportunities, created by ETF shares mispricing, and their impact on bond yields. Third essay of this dissertation is about liquidity in the corporate bond market. In market distress, corporate bond investors tend to sell liquid assets and hold onto illiquid ones, a phenomenon which we call flight to illiquidity. We study the impact of flight to illiquidity on corporate bond prices/yields in cross-section as well as corporate bond returns in time-series. First, we show that liquidity price premium disappears in market distress, meaning that liquid bonds are not more expensive than illiquid bonds in distress times. Second, we show that illiquiduity return premium which exists during normal times, not only does not change sign or disappears, but also widens in market distress. In other words, liquid bonds deliver a lower return both on average and during market distress. This pattern is limited to investment grade corporate bonds. Our findings suggest that keeping the credit risk fixed, liquid bonds do not provide safety during the time it is needed the most. / Thesis (PhD) — Boston College, 2016. / Submitted to: Boston College. Carroll School of Management. / Discipline: Finance.