Prague Economic Papers 2016, 25(1):3-18 | DOI: 10.18267/j.pep.533

Active Management and Price Efficiency of Exchange-traded Funds

Tao Chen1, Karen H. Y. Wong2, Masayuki Susai3
1 Lee Shau Kee School of Business and Administration, Open University of Hong Kong, Hong Kong (tchen@ouhk.edu.hk).
2 Lee Shau Kee School of Business and Administration, Open University of Hong Kong, Hong Kong.
3 Faculty of Economics, Nagasaki University, Nagasaki, Japan.

This paper extends the debate over the benefits of active management by investigating its impact on price efficiency using data from available ETFs traded on the US market. After accounting for various tests in terms of price efficiency, we find that active management matters to the efficiency improvement. One practical implication of this study is that more active management element might be considered by fund managers in designing and managing their ETFs so as to reflect all available information into fund prices.

Keywords: price efficiency, exchange-traded funds, active management
JEL classification: G11, G14

Published: January 1, 2016  Show citation

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Chen, T., Wong, K.H.Y., & Susai, M. (2016). Active Management and Price Efficiency of Exchange-traded Funds. Prague Economic Papers, 25(1), 3-18. doi: 10.18267/j.pep.533
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