An analysis of pricing efficiency of exchange traded funds in India using ARDL bounds test approach
by Buvanesh Chandrasekaran; Rajesh H. Acharya
Afro-Asian J. of Finance and Accounting (AAJFA), Vol. 11, No. 4, 2021

Abstract: This paper analyses the pricing efficiency of exchange traded funds (ETFs) in India. In order to achieve the objective, the study employs the autoregressive distributed lag (ARDL) model - bounds test approach. The study includes 14 equity ETFs for the time period from the inception date of each ETF to December 2016. An attempt has been made to establish long-run relationship between the closing price of ETFs and closing index values using ARDL model. The study also analyses the research question in the presence of single and multiple structural breaks. Empirical results of the study show that the absolute pricing deviation is relatively small in the case of ETFs. Most of the ETFs have long-run relationship with the underlying index. The study confirms structural breaks in the ETF closing price time series. With the introduction of structural breaks, increase in the size of statistically significant long-run coefficients indicates an improvement in the speed of correction to the equilibrium level.

Online publication date:: Thu, 23-Sep-2021

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