Date of Award

8-2012

Document Type

Thesis

Degree Name

Master of Arts (MA)

Legacy Department

Economics

Advisor

Isengildina-Massa, Olga

Committee Member

Baier, Scott

Committee Member

Maloney, Michael

Abstract

Since their introduction in the mid 1990's, ETFs have grown rapidly in number and diversified into various markets. In addition they have evolved to become increasingly more complex. While there has been some research in the area of these instruments, most of it has focused on their performance and little in regards to the possible effects they may have on the broader market. The redemption mechanism that is built into most ETFs is a unique aspect of these securities that may have unintended effects on markets due to large volume of securities changing hands. This study shows that as the spread between the price of an ETF and its net asset value increases there are measurable differences in the volatility of the stocks that make up its underlying basket.

Included in

Economics Commons

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