Title: Innovations in exchange-traded funds: a comprehensive analytical overview

Authors: Vinh Huy Nguyen; Le Zhao; Suchismita Mishra

Addresses: Department of Finance, Real Estate, and Business Law, Craig School of Business, California State University, Fresno, 5245 N. Backer Ave., M/S PB7, Fresno, CA, 93740, USA ' Department of Finance, Real Estate, and Business Law, Craig School of Business, California State University, Fresno, 5245 N. Backer Ave., M/S PB7, Fresno, CA, 93740, USA ' Department of Finance, College of Business Administration, Florida International University, 11200 S.W. 8th Street, RB 204BA, Miami, Florida, 33199, USA

Abstract: A review of the prior innovations in exchange-traded funds (ETFs), including arbitrage trading, price discovery processes, short selling, hedging, and leveraged ETFs. An examination of the latest innovation, single-stock ETFs, provides preliminary insights. Approved for trading by the U.S. Securities and Exchange Commission in the summer of 2022, single-stock ETFs are based on highly liquid stocks. They appear to track the promised leveraged daily returns with an average deviation of one basis point. Single-stock ETF liquidity could be a concern going forward as financial institutions continue to create more of these ETFs.

Keywords: ETF; exchange-traded fund; price discovery; arbitrage; short selling; hedging; leverage; innovation.

DOI: 10.1504/AJFA.2024.139132

American Journal of Finance and Accounting, 2024 Vol.8 No.1, pp.57 - 80

Received: 18 Oct 2023
Accepted: 14 Apr 2024
Published online: 14 Jun 2024 *

Full-text access for editors Full-text access for subscribers Purchase this article Comment on this article