Does Investor Sentiment Affect ETF Information Efficiency? Is Improving or Impairing?

• Main Authors: Yung-Ching Tseng, 曾永慶
• Other Authors: Wo-Chiang Lee
• Format: Others
• Language: en_US
• Published: 2016
• Online Access: http://ndltd.ncl.edu.tw/handle/55129021217861177796

博士 === 淡江大學 === 財務金融學系博士班 === 104 === This study aims to analyze the effect of investor’s sentiment on the Exchange Traded Funds (ETFs) liquidity to capture the various investment sentiment for the ETFs liquidity changes, using the Volatility Index (VIX) as a proxy variable to observe the market characteristics. Our sample data mainly focus on the Asia ETF market, and the empirical results show that the degree of market investor sentiment plays an important role in the ETF liquidity within these Asia countries. In order to accurately capture the liquidity characteristics, this study adopt the GARCH model to check whether ETF liquidity has a volatility-clustering effect or not, by adding Polite (2008) financial data with heavy tail characteristic, to correct the distribution pattern of missing data on GARCH model, which is an new idea in this paper. The empirical result shows that ETF has liquidity and volatility-clustering effect, which means there is a better or poor liquidity phenomenon in a specific period, which depends on monetary environment conditions and market investors’ expectation. In addition, our research also found that VIX and ETF liquidity would have a significantly different relationship with the development of different countries. From the viewpoints of hedging market risk and portfolio investment, this paper suggests investor to take consideration of the sentiment factors into their investment decision, and timely readjust the investment weight of ETF product.