| Article ID | Journal | Published Year | Pages | File Type |
|---|---|---|---|---|
| 5085223 | International Review of Financial Analysis | 2010 | 12 Pages |
Abstract
The aim of our paper is to examine whether Exchange Traded Funds (ETFs) diversify away the private information of informed traders. We apply the spread decomposition models of Glosten and Harris (1998) and Madhavan, Richardson and Roomans (1997) to a sample of ETFs and their control securities. Our results indicate that ETFs have significantly lower adverse selection costs than their control securities. This suggests that private information is diversified away for these securities. Our results therefore offer one explanation for the rapid growth in the ETF market.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Patricia Chelley-Steeley, Keebong Park,