Feedback Trading Strategy and Investors Behavior in Exchange Traded Fund in Iran

Document Type : Original Article

Authors

1 * Ph.D. Candidate in Economics, Qazvin Branch, Islamic Azad University, Qazvin, Iran

2 Assistant Prof., Department of Economics, Qazvin Branch, Islamic Azad University, Qazvin, Iran.

Abstract

Exchange Traded Funds (ETFs) have so many features like low cost, tax efficiency, liquidity and stock like attributes which make it most attractive. Because of this, ETFs are the most popular type of investment destination. Intuitively, because of their ease and low cost of trading, ETFs may be appealing to individual (unsophisticated, uninformed) investors who are more likely to chase trends, raising a concern over the impact of their introduction on the overall market efficiency. The purpose of this article is to examine the strategy of feedback trading and investors’ behavior ETF in the capital market of Iran for the first time. For this purpose, the daily data of seven ETFs 2013/10/07-2023/03/20 and Santana-Wadvani model (1992) have been used. The results showed that despite the existence of a fully overlapping market for underlying asset transactions, these ETFs are traded below their net asset value on most trading days. The results of the estimation of the feedback trading model showed that there is no evidence of the existence of feedback trading in ETFs and traders do not pay attention to their past performance. The market of these ETFs is efficient, which can be attributed to the professional management of these ETFs

Keywords

References

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Financial Management Perspective
Volume 13, Issue 42
July 2023
Pages 91-116

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