The Provision of Liquidity in ETFs: Theory and Evidence from European Markets

Calamia, Anna; Deville, Laurent; Riva, Fabrice

doi:10.2139/ssrn.2835907

Cited by 4 publications

(4 citation statements)

References 22 publications

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“…At the same time, they are clearly inconsistent with the substitution hypothesis, which posits that spot and 31 The corresponding coefficient even becomes negative but is only significant at the 10% level in Panel A and insignificant in Panel B. 32 Calamia et al (2016) relate ETF liquidity to the average liquidity of the stocks contained in the ETF. They find a significantly positive relation only for low-volume ETFs.…”

Section: Discussionmentioning

confidence: 97%

“…Calamia, Deville, and Riva () develop a model of market making in the exchange‐traded fund (ETF) market that yields predictions about the relation between liquidity in the ETF market and liquidity in the market for the constituents of the underlying index. Their model differs from ours in two important ways.…”

mentioning

confidence: 99%

“…Calamia et al () relate ETF liquidity to the average liquidity of the stocks contained in the ETF. They find a significantly positive relation only for low‐volume ETFs.…”

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confidence: 99%

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Illiquidity transmission from spot to futures markets

Korn

Krischak

Theissen

2019

Journal of Futures Markets

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We develop a model of illiquidity transmission from spot to futures markets that formalizes the derivative hedge theory of Cho and Engle (1999). The model shows that spot market illiquidity does not translate one to one to the futures market but, rather, interacts with price risk, liquidity risk, and the risk aversion of the market maker. The model's predictions are tested empirically with data from the stock market and markets for single‐stock futures and index futures. The results support our model and show that the derivative hedge theory provides an explanation for the liquidity link between spot and futures markets.

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Section: Discussionmentioning

confidence: 97%

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confidence: 99%

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Illiquidity transmission from spot to futures markets

Korn

Krischak

Theissen

2019

Journal of Futures Markets

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“…Eine positive Beziehung zwischen der Liquidität eines ETF und seines Benchmarkindex wird in der Praxis häufig als gegeben angenommen (Calamia et al (2014)…”

Section: Etf-märkteunclassified

Liquiditätszusammenhänge zwischen Kassa- und Derivatemärkten

Krischak¹

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Measuring the Liquidity of ETFs: An Application to the European Market

Roncalli

Zheng

2014

SSRN Journal

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The liquidity of exchange traded funds is of utmost importance for regulators, investors and providers. However, the study of liquidity is still in its infancy. In this work, we show some stylised facts of liquidity statistics (daily/intraday spread, trading volume, etc.). We also propose a new liquidity measure combining these statistics. In this case, liquidity is a power function of the spread where the parameters are determined by actual trading volumes. We also study the relationship between the liquidity of ETFs and the liquidity of the underlying index. We show that they are correlated on a daily basis, but not in terms of intraday frequency. We also define a measure of liquidity improvement and apply it to the EURO STOXX 50 index.

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The Provision of Liquidity in ETFs: Theory and Evidence from European Markets

Cited by 4 publications

References 22 publications

Illiquidity transmission from spot to futures markets

Illiquidity transmission from spot to futures markets

Liquiditätszusammenhänge zwischen Kassa- und Derivatemärkten

Measuring the Liquidity of ETFs: An Application to the European Market

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