TY - JOUR
T1 - Volatility effect of ETFs on the constituents of the underlying Taiwan 50 Index
AU - Lin, Ching Chung
AU - Chiang, Min Hsien
N1 - Funding Information:
The authors would like to thank an anonymous referee for many helpful comments and the National Science Council in Taiwan for financial support (Project #: NSC-94-2416-244-007).
Copyright:
Copyright 2008 Elsevier B.V., All rights reserved.
PY - 2005/12/1
Y1 - 2005/12/1
N2 - Owing to the growing importance of the Taiwan Top 50 Tracker Fund (TTT), the first and the only Taiwanese Exchange Traded Fund (ETF), this study investigates the change in the volatility of the component stocks of the Taiwan 50 Index after the introduction of TTT. Using the volatility measure proposed by Andersen et al. (2001) and the unconditional variance of a GARCH model to measure the volatilities of the constituents of the Taiwan 50 Index, the empirical results of this study demonstrate that the volatility of the component stocks increased following the establishment of TTT. The patterns of volatility change do not differ statistically among different size categories. However, the volatilities of the electronic and the financial sector TTT constituent companies increased significantly after the introduction of TTT, while the volatility of companies in the mixed sector reduced.
AB - Owing to the growing importance of the Taiwan Top 50 Tracker Fund (TTT), the first and the only Taiwanese Exchange Traded Fund (ETF), this study investigates the change in the volatility of the component stocks of the Taiwan 50 Index after the introduction of TTT. Using the volatility measure proposed by Andersen et al. (2001) and the unconditional variance of a GARCH model to measure the volatilities of the constituents of the Taiwan 50 Index, the empirical results of this study demonstrate that the volatility of the component stocks increased following the establishment of TTT. The patterns of volatility change do not differ statistically among different size categories. However, the volatilities of the electronic and the financial sector TTT constituent companies increased significantly after the introduction of TTT, while the volatility of companies in the mixed sector reduced.
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U2 - 10.1080/09603100500389630
DO - 10.1080/09603100500389630
M3 - Article
AN - SCOPUS:31144456475
SN - 0003-6846
VL - 15
SP - 1315
EP - 1322
JO - Applied Financial Economics
JF - Applied Financial Economics
IS - 18
ER -