Exchange-traded funds and the new dynamics of investing:
Gespeichert in:
| 1. Verfasser: | |
|---|---|
| Format: | Buch |
| Sprache: | English |
| Veröffentlicht: |
Oxford
Oxford University Press
[2016]
|
| Schriftenreihe: | Financial management association survey & synthesis series
|
| Schlagworte: | |
| Online-Zugang: | Inhaltsverzeichnis |
| Beschreibung: | xiv, 269 Seiten Diagramme |
| ISBN: | 9780190279394 |
Internformat
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| 245 | 1 | 0 | |a Exchange-traded funds and the new dynamics of investing |c Ananth N. Madhavan |
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Datensatz im Suchindex
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|---|---|
| adam_text | CONTENTS
Preface xiii
Acknowledgments xv
PART I Passive Investing
1. The Current Landscape 3
1.1. Introduction 3
1.2. Active and Passive Investing 4
1.2.1. Rise of Indexing 4
1.2.2. Investment Strategies 4
1.3. Evolution of Investment Ideas 6
1.3.1. Benchmarks 6
1.3.2. Determinants of Active Performance 9
1.3.3. Purity Hypothesis 10
1.4. Investment Vehicles 12
1.4.1. Exchange-Traded Funds and Other Fund Structures 12
1.4.2. Advantages of the ETF Structure 12
1.4.3. Asset Classes and Diversity of Exposures 13
1.4.4. Criticisms of Passive Indexing and ETFs 15
1.5. Chapter Summary 17
2. Structure and Mechanics 19
2.1. Introduction 19
2.2. ETF Structure 19
2.2.1. Authorized Participants 19
2.2.2. Creation/Redemption Mechanism 20
2.2.3. Arbitrage: Value and Price 22
2.2.4. In-Kind Transactions and Tax Efficiency 23
2.3. Nomenclature 25
2.4. Governance, Management Structure, and Legal Aspects 27
2.4.1. Fundamentals of Regulation 27
2.4.2. Exemptive Relief 28
2.5. Industrial Organization 30
2.6. Chapter Summary 31
VI
Contents
PART II Valuation, Pricing, and Trading
3. Price Dynamics and Arbitrage 35
3.1. Introduction 35
3.2. Conceptual Framework 35
3.2.1. Definitions 35
3.2.2. Pricing and Liquidity 36
3.2.3. Speed of Arbitrage 38
3.2.4. Premiums and Discounts 39
3.2.5. Special Cases of the Model 39
3.2.6. Practical Illustration 40
3.3. Theoretical Results 42
3.3.1. Decomposition of Premiums 42
3.3.2. Economic Significance 43
3.3.3. Volatility 43
3.3.4. Autocorrelation 45
3.4. Chapter Summary 45
4. Valuation 47
4.1. Introduction 47
4.2. Individual Security Based Valuation 47
4.2.1. Fundamental Value 47
4.2.2. Valuing Bond ETFs 48
4.2.3. Valuation of International Funds 49
4.3. Statistical Estimation 51
4.3.1. Top Down Approaches 51
4.3.2. State-Space Representation 52
4.4. Estimation 53
4.5. Analysis of Premiums, Arbitrage, and Price Efficiency 55
4.5.1. True Premiums 55
4.5.2. True versus Reported Premiums 56
4.5.3. Price Discovery 57
4.5.4. ETFs in the Financial Crisis 58
4.6. Chapter Summary 58
5. Performance and Benchmark Tracking 61
5.1. Introduction 61
5.2. Common Misunderstandings 62
5.2.1. Tracking Error versus Tracking Difference 62
5.2.2. NAV versus Index Returns 63
5.3. Optimal Design 64
5.4. Total Cost of Ownership 65
5.5. Chapter Summary 67
6. Liquidity and Transaction Costs 68
6.1. Introduction 68
6.2. Primary and Secondary Markets 68
Contents
Vll
6.2.1. Defining Liquidity 68
6.2.2. Relative Size 69
6.3. Why Trading Costs Are Lower for ETFs than their Underlying Securities 71
6.3.1. Role of Market Transparency 73
6.3.2. Modeling Costs 73
6.4. Chapter Summary 76
PART III Applications
7. Uses of ETFs 79
7.1. Introduction 79
7.2. Core and Factor Exposures 79
7.2.1. Individual Investors 79
7.2.2. Factor Exposures 80
7.3. Institutional Uses 81
7.4. Futures, Swaps, and ETFs 82
7.5. Chapter Summary 87
8. Fixed Income 88
8.1. A Growth Story 88
8.2. Fixed Income Basics 89
8.2.1. Does Market Capitalization Weighting Make Sense? 89
8.2.2. Active Choices in Index Construction 90
8.2.3. Defining Exposures 91
8.3. Users of Fixed Income Passive Products 92
8.3.1. Bond Buyers 92
8.3.2. Institutional Uses 93
8.3.3. Barriers to Adoption 93
8.4. Role of Analytics 94
8.5. Fixed Income Market Structure and Future Opportunities 96
8.5.1. Over-the-Counter Markets 96
8.5.2. Bond Market Liquidity and Transaction Costs 97
8.5.3. Electronic versus Voice Trading 98
8.6. Fixed Income Markets in Stress 100
8.6.1. Liquidity Illusion 100
8.6.2. Case Study: The “Taper Tantrum” of 2013 101
8.7. Chapter Summary 104
9. Commodities 106
9.1. Introduction 106
9.2. How Commodity ETFs Work 106
9.2.1. Types of Commodity Funds 106
9.2.2. Example—Natural Gas 107
9.2.3. Futures Based ETFs 108
9.3. Commodity Indexes 109
9.4. Chapter Summary 111
Contents
viii
10. Foreign Currency 113
10.1. Beyond Stocks and Bonds 113
10.2. Why Should Investors Care about Foreign Exchange? 113
10.2.1. Foreign Exchange Denominates Asset Classes 113
10.2.2. Why Foreign Exchange Matters 114
10.3. How to Invest in Foreign Exchange Using Currency ETFs 115
10.3.1. Types of Currency Funds 115
10.3.2. Hedging Currency Risk 116
10.4. Conceptual Framework 118
10.4.1. Impact of Currency Returns on Portfolio
Returns 118
10.4.2. Optimal Hedge Ratio 120
10.5. Empirical Evidence 121
10.5.1. Returns 121
10.5.2. Currency Returns and Volatility 122
10.5.3. Comparison of Returns 122
10.6. Chapter Summary 124
11. Investing in Volatility 125
11.1. Is Volatility an Asset Class? 125
11.2. Shaping the Distribution of Returns with Volatility
Products 125
11.2.1. VIX Index and Volatility Futures 125
11.2.2. Futures on Volatility and Correlation Indexes 126
11.2.3. Options on ETFs 127
11.2.4. Historical Volatility 127
11.2.5. Example: ETFs on VIX 128
11.3. Returns of Volatility Funds 129
11.3.1. Term Structure ofVolatility 129
11.3.2. Roll Yield 130
11.3.3. Speculating on Volatility 133
11.4. Chapter Summary 133
12. Alternatives and Multi-Asset Strategies 135
12.1. Introduction 135
12.2. What Are Alternatives? 136
12.2.1. Alternative Assets, Alternative Strategies 136
12.2.2. Hedge Funds versus Open-Ended Funds 136
12.3. Investment issues 137
12.3.1. Optimal Capital Allocation 137
12.3.2. Impact on Portfolio Construction 139
12.3.3. Practical Applications: Liquid Real Estate Indexes 140
12.4. Combining Alternatives: Fundamental Law of Active
Management 142
12.5. Chapter Summary 143
Contents
IX
PART IV Active Strategies
13. Active Strategies 147
13.1. Introduction 147
13.2. Alternative Weighting Schemes and Fundamental Indexes 148
13.2.1. Equal-Weighting and Price-Weighting 148
13.2.2. Fundamental Indexes 149
13.2.3. Diversification Strategies 150
13.2.4. Optimized Funds 150
13.2.5. Model-Based Transparent Active Funds 151
13.2.6. Minimum Volatility Strategies 152
13.2.7. Pure Long-Short Funds 152
13.2.8. Risk Concentration 154
13.2.9. Tail Risk 155
13.3. Key Differences between Active Structures 157
13.3.1. Hedge Funds versus ETFs 157
13.3.2. Active Mutual Funds versus ETFs 158
13.3.3. Active Funds and Regulation 159
13.4. Chapter Summary 160
14. Smart Beta and Factor Investing 162
14.1. Introduction 162
14.2. Factors 162
14.3. Closet Indexing 167
14.3.1. Mutual Fund Factors 168
14.3.2. Identifying Closet Indexers 171
14.3.3. Can Active Share Predict Performance? 172
14.3.4. What Does Active Share Measure? 173
14.3.5. Multi-Manager Factor Risk 176
14.3.6. Long Only versus Long-Short Implementation 177
14.4. Fundamental Active ETFs 177
14.4.1. Reverse Engineering 177
14.4.2. Nontransparent Active ETFs 178
14.4.3. Inferring Holdings from Public Data 179
14.4.4. Practical Issues 180
14.5. Capacity and Crowding 181
14.6. Chapter Summary 181
PART V Public Policy, Regulation, and Systemic Risk
15. Flows 185
15.1. Introduction 185
15.2. Why Are Flows Important? 185
15.3. Modeling Flows 186
15.3.1. Universe 186
15.3.2. Flow Dynamics 187
153.3. Equity Flows 189
15.3.4. Results for Fixed Income and Commodity ETFs 189
15.4. Applications of Flow Analysis 190
15.4.1. Regulatory Context 190
15.4.2. Sentiment and Flows 191
15.5. Do Passive Flows Affect Correlations? 192
15.6. Impact of Flows on Underlying Constituent Returns 194
15.6.1. Pairwise Correlations 194
15.6.2. Impact on Volumes of Underlying Assets 196
15.6.3. Shock Propagation 196
15.7. Chapter Summary 197
16. Leveraged and Inverse Products 198
16.1. Introduction 198
16.2. Drivers of Growth 198
16.3. Compounding and Returns 199
16.3.1. Compounding and Return Decay 199
16.3.2. Extensions 200
16.4. Rebalancing 201
16.4.1. Mechanics 201
16.4.2. Impact of Rebalancing Activity 203
16.4.3. Empirical Evidence on Rebalancing Activity 204
16.5. Chapter Summary 206
17. Systemic Risk 207
17.1. Introduction 207
17.2. Regulatory Issues and Policy Implications 208
17.3. Possible Risks and Dependencies 209
173.1. Visualizing the Ecosystem 209
17.3.2. Dependence of Authorized Participants 209
17.4. Fire Sales and Redemption Risk 212
17.5. Policy Tools 214
17.5.1. Swing Pricing 214
17.5.2. The Fund Managers3 Tool Kit 215
17.53. Example: Leveraged Loans 216
17.6. Do ETFs Drive Prices of Underlying Assets? 216
17.6.1. Imputed Flow 217
17.6.2. Concerns about Differential Weighting and Flows 218
17.63. Governance and Passive Flows 219
17.7. Chapter Summary 221
18. Public Policy Issues 222
18.1. Overview of Concerns 222
18.2. CommonMyths 222
18.2.1. Excess Shorting 222
18.2.2. Securities Lending and Counterparty Risk 223
Contents
XI
18.2.3. Settlement Failures 225
18.2.4. Synthetics 225
18.2.5. Fund Closures 226
18.3. Flash Crash 227
18.3.1. Theories of the Flash Crash 227
18.3.2. Flash Crash and Fragmentation 229
18.4. Flash Back 231
18.4.1. Market Disruption of August 2015 231
18.4.2. ETFs in the August 201S Flash Event 232
18.5. Chapter Summary 234
19. Future Opportunities 236
19.1. Introduction 236
19.2. Long-Horizon Drivers 236
19.3. Technology 237
19.3.1. The Growing Importance of Technology and Analytics 237
19.3.2. Digital Advisors 238
19.3.3. Data Science and Behavioral Finance 239
19.3.4. Individual Investors 240
19.4. Final Remarks 240
Glossary 243
References 247
About the Author 253
Disclosure Statement 255
Author Index 257
Subject Index 261
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| indexdate | 2024-07-10T07:25:04Z |
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| spelling | Madhavan, Ananth Narayan (DE-588)170523837 aut Exchange-traded funds and the new dynamics of investing Ananth N. Madhavan Oxford Oxford University Press [2016] © 2016 xiv, 269 Seiten Diagramme txt rdacontent n rdamedia nc rdacarrier Financial management association survey & synthesis series Anlageverhalten (DE-588)4214003-1 gnd rswk-swf Kapitalanlage (DE-588)4073213-7 gnd rswk-swf Index-Partizipationsschein (DE-588)4551239-5 gnd rswk-swf Index-Partizipationsschein (DE-588)4551239-5 s Kapitalanlage (DE-588)4073213-7 s Anlageverhalten (DE-588)4214003-1 s DE-604 Erscheint auch als Onlineausgabe 978-0-19-027942-4 Digitalisierung UB Bamberg - ADAM Catalogue Enrichment application/pdf http://bvbr.bib-bvb.de:8991/F?func=service&doc_library=BVB01&local_base=BVB01&doc_number=028823128&sequence=000001&line_number=0001&func_code=DB_RECORDS&service_type=MEDIA Inhaltsverzeichnis |
| spellingShingle | Madhavan, Ananth Narayan Exchange-traded funds and the new dynamics of investing Anlageverhalten (DE-588)4214003-1 gnd Kapitalanlage (DE-588)4073213-7 gnd Index-Partizipationsschein (DE-588)4551239-5 gnd |
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| title | Exchange-traded funds and the new dynamics of investing |
| title_auth | Exchange-traded funds and the new dynamics of investing |
| title_exact_search | Exchange-traded funds and the new dynamics of investing |
| title_full | Exchange-traded funds and the new dynamics of investing Ananth N. Madhavan |
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| title_full_unstemmed | Exchange-traded funds and the new dynamics of investing Ananth N. Madhavan |
| title_short | Exchange-traded funds and the new dynamics of investing |
| title_sort | exchange traded funds and the new dynamics of investing |
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