The effect of ETFs on financial markets: a literature review

Item Type Journal paper

Exchange-traded funds (ETFs) belong to the fastest growing investment products worldwide. Within 15 years, total assets invested in ETFs have twenty-folded, reaching over $3.7 trillion at the end of 2018. Increasing demand for passive investments,
coupled with high liquidity and low transaction costs, are key advantages of ETFs compared to their closest substitutes such as traditional index funds. Besides the continuous growth of ETFs, the Flash Crash in 2010 triggered detailed investigations by
regulators on how ETFs affect the financial market. This literature review provides a broad overview of recent academic studies analyzing the effect of ETFs on liquidity, price discovery, volatility, and comovement of the underlying securities.

Authors Liebi, Luca
Journal or Publication Title Financial Markets and Portfolio Management
Language English
Subjects economics
HSG Classification contribution to scientific community
HSG Profile Area SOF - System-wide Risk in the Financial System
Refereed Yes
Date 28 February 2020
Publisher Swiss Society for Financial Market Research
Place of Publication New York
Volume 34
Number 2
Page Range 165-178
Number of Pages 14
ISSN 1555-4961
Publisher DOI
Official URL
Depositing User M.A. Luca Liebi
Date Deposited 06 Jan 2021 09:27
Last Modified 06 Jan 2021 09:30


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Liebi, Luca (2020) The effect of ETFs on financial markets: a literature review. Financial Markets and Portfolio Management, 34 (2). 165-178. ISSN 1555-4961

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