Exchange-traded funds (ETFs) and market efficiency – Complete Phd and Masters Thesis

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Introduction

Exchange-traded funds (ETFs) have gained significant popularity in recent years as an investment vehicle that offers investors the opportunity to diversify their portfolios with a single trade. ETFs are investment funds traded on stock exchanges, much like individual stocks, and typically track an index, commodity, or specific sector. The unique structure of ETFs allows for intra-day trading and provides investors with diversification benefits, liquidity, and cost-efficiency.

Market efficiency is a key concept in finance that examines the degree to which asset prices reflect all available information. In an efficient market, asset prices quickly adjust to new information, making it difficult for investors to consistently outperform the market. The efficient market hypothesis (EMH) posits that it is not possible to consistently beat the market, as asset prices always reflect all available information.

This thesis explores the relationship between ETFs and market efficiency, seeking to understand how ETF trading impacts market efficiency and whether ETFs provide an efficient means of accessing diversified investment opportunities. By examining the impact of ETF trading on market efficiency, this study aims to contribute to the understanding of how ETFs influence market dynamics and the efficiency of asset pricing.

Table of Contents

Chapter 1: Introduction
1.1 Introduction
1.2 Background of study
1.3 Problem Statement
1.4 Objective of study
1.5 Limitation of study
1.6 Scope of study
1.7 Significance of study
1.8 Structure of the Thesis
1.9 Definition of terms

Chapter 2: Literature Review
2.1 Overview of ETFs
2.2 History of ETFs
2.3 Types of ETFs
2.4 Market efficiency theory
2.5 Empirical studies on ETFs and market efficiency
2.6 Impact of ETFs on market liquidity
2.7 ETF trading strategies
2.8 Arbitrage opportunities in ETFs
2.9 ETFs and market anomalies
2.10 ETF pricing efficiency

Chapter 3: Research Methodology
3.1 Research design
3.2 Data collection methods
3.3 Data analysis techniques
3.4 Sample selection
3.5 Hypothesis development
3.6 Variables and measures
3.7 Statistical methods
3.8 Validity and reliability

Chapter 4: Discussion of Findings
4.1 Analysis of ETF trading volume and market efficiency
4.2 Relationship between ETF flows and market volatility
4.3 Impact of ETF arbitrage on market efficiency
4.4 Efficiency of ETF pricing mechanisms
4.5 Market reaction to ETF creation/redemption activity
4.6 Performance of ETF trading strategies
4.7 Influence of ETFs on market anomalies
4.8 Comparison of ETFs with other investment vehicles

Chapter 5: Conclusion and Summary
5.1 Summary of findings
5.2 Implications of the study
5.3 Recommendations for future research
5.4 Conclusion

Thesis Overview

Exchange-traded funds (ETFs) have emerged as a popular investment vehicle that has significantly influenced market dynamics and the efficiency of asset pricing. This thesis aims to explore the relationship between ETFs and market efficiency, examining how ETF trading impacts market dynamics and the degree to which ETFs provide efficient means of accessing diversified investment opportunities.

The literature review provides an overview of ETFs, their history, types, and the theory of market efficiency. Empirical studies on ETFs and market efficiency are reviewed, focusing on the impact of ETFs on market liquidity, trading strategies, arbitrage opportunities, market anomalies, and pricing efficiency. The research methodology outlines the design, data collection methods, analysis techniques, sample selection, hypothesis development, variables, and measures employed in the study.

The discussion of findings analyzes the relationship between ETF trading volume and market efficiency, the impact of ETF flows on market volatility, the efficiency of ETF pricing mechanisms, and the influence of ETF arbitrage on market efficiency. The conclusion summarizes the findings, discusses the implications of the study, provides recommendations for future research, and draws conclusions on the relationship between ETFs and market efficiency.

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