ETF liquidation determinants

Sherrill, D. Eli; Stark, Jeffrey R.

doi:10.1016/j.jempfin.2018.07.007

Cited by 19 publications

(12 citation statements)

References 18 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…They argue that ETF closures depend more on fund objectives and that fund performance is not as critical a factor as it is for an actively managed mutual fund. Our study on ETFs closure is different from Sherrill and Stark (2018) in several aspects. First, while they use objective, family and fund-level variables, their focus is on the comparison of ETF and actively managed mutual funds closures, with the majority of their findings related to the latter.…”

Section: Introductionmentioning

confidence: 75%

“…The only other study on ETF closure to our knowledge, Sherrill and Stark (2018), find that ETFs fail when they are small and launched by a struggling fund family. They argue that ETF closures depend more on fund objectives and that fund performance is not as critical a factor as it is for an actively managed mutual fund.…”

Section: Introductionmentioning

confidence: 90%

“…They argue that in a highly populated ETF landscape, investors are best advised to avoid low-liquidity funds, where trading and pricing inefficiencies are most likely to exist. As previously noted, Sherrill and Stark (2018) compare ETF and mutual fund closures from 2006 to 2016 using a logit analysis. Their primary findings for ETFs are that smaller fund size and lack of flow of capital into the funds display consistently statistically significant relationships to the likelihood of ETF closure.…”

Section: Etf Studiesmentioning

confidence: 99%

“…We examine ETFs exclusively and provide a systematic study of the factors that contribute to the likelihood of ETF closure: we consider a number of fund performance and liquidity measures; fund size and fund family size, investor capital flow, and investment style and strategy categories. Second, Sherrill and Stark (2018) use a multinomial logit model to test AJB 35,3/4 for fund closure while we use a Cox Proportional Hazard (CPH) model. The CPH model allows us the flexibility to examine returns across multiple time horizons (e.g.…”

Section: Introductionmentioning

confidence: 99%

See 3 more Smart Citations

Exchange Traded Funds and the likelihood of closure

Akhigbe

Balasubramnian

Newman

2020

AJB

View full text Add to dashboard Cite

PurposeThough exchange-traded funds (ETFs) are similar to mutual funds, we identify several reasons how they are different based on their structure and trading characteristics. Therefore, we argue that the determinants of fund closure decisions for ETFs will not be the same as the mutual funds. We systematically explore those factors.Design/methodology/approachWe use Cox Proportional Hazard model, which is considered a superior method, over the logistic regression models. All previous studies are based on logistic regressions.FindingsWe investigate the closure rate of ETFs over the 1995–2018 sample period. We find that the first three years are the most critical period for the survival of ETFs. Our full sample results show that early fund performance, the investment style of the fund, the expense ratio and fund family size are the most relevant factors influencing the likelihood of closure. When we consider equity-only funds, we find that key factors that influence fund closure are early fund performance, the expense ratio, failure to grow the fund's assets relatively quickly and the equity investment category of the fund.Research limitations/implicationsTracking error could be a significant factor. However, we have several missing values in the data. Therefore, we are forced to drop that variable. However, we use the SD of daily returns in lieu of that. Similarly, we were constrained by the availability of data for the equity style box scores.Practical implicationsOur study suggests that individual investors will be better off by investing in ETFs that are at least three-year to four-year old. If individuals want to invest in ETFs from the date of inception, the probability of survival is higher for an ETF within a larger fund family.Social implicationsHopefully, our research will attract the attention of CFPB and provide a warning to individual investors when they choose to invest in ETFs. More and more ETFs are getting included in retirement savings. So, abrupt ETF closures are likely to have large social implications for the future.Originality/valueWe are the first to use Cox Proportional Hazard model. We base our arguments from latest research on ETFs that the one earlier paper on ETF closure has missed. So, we examine the issue in a more systematic way.

show abstract

Section: Introductionmentioning

confidence: 75%

Section: Introductionmentioning

confidence: 90%

Section: Etf Studiesmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Exchange Traded Funds and the likelihood of closure

Akhigbe

Balasubramnian

Newman

2020

AJB

View full text Add to dashboard Cite

show abstract

“…Other studies such as Zhao (2005), Rohleder et al (2011), and Sherrill and Stark (2018) consider that fund size plays an important role in its disappearance since smaller funds have a higher probability of disappearing. Moreover, Zhao (2005) adds that the disappearance of a fund occurs in smaller portfolios that have a smaller variety of assets.…”

Section: H1: Age Decreases the Risk Of A Fund Disappearingmentioning

confidence: 99%

Investment Objectives and Factors That Influence the Disappearance of Spanish Mutual Funds

Barberà-Mariné¹,

Fabregat‐Aibar²,

Terceño³

2020

Journal of Business Economics and Management

View full text Add to dashboard Cite

This paper analyses which variables influence the disappearance of mutual funds in the Spanish market and whether these variables vary depending on the investment objectives. The following variables are tested: age, size, investment flows, return, volatility, Sharpe ratio, Morningstar rating, and fund family. The Kaplan-Meier estimator and an extension of the Cox model, the Andersen-Gill model are used and the results indicate that the impact of some variables on survival capacity is different depending on the fund’s investment objectives. The originality of this article is twofold. The analysis of disappearance takes the investment objectives of the mutual funds into account and a new variable, the Morningstar rating, is introduced. Moreover, no previous study examines survival capacity in the Spanish market according to different investment objectives. In Spain, mutual funds are highly concentrated because most of them are in the hands of a small number of banks who also control the country’s largest fund families. This characteristic not only makes the Spanish market an interesting one for analysis, but it also means that the results of this paper are significant for mutual fund investors.

show abstract

Exchange-Traded Funds: Concepts and Contexts

Marszk¹,

Lechman²

2019

Exchange-Traded Funds in Europe

View full text Add to dashboard Cite

ETF liquidation determinants

Cited by 19 publications

References 18 publications

Exchange Traded Funds and the likelihood of closure

Exchange Traded Funds and the likelihood of closure

Investment Objectives and Factors That Influence the Disappearance of Spanish Mutual Funds

Exchange-Traded Funds: Concepts and Contexts

Contact Info

Product

Resources

About