Study On The Anomalies Of The International ETF Market

Exchange trade fund (ETF) is an important financial innovation in recent years. Because its special trading mechanism, it trace the underlying index with higher efficiency than close end fund. But the ETF markets do have anomalies similar to the close end fund puzzle.The international ETF tracing the foreign index relates to two market——foreign market and local market, this article makes a research on the international ETF market to make out the performance of its anomalies——underreaction to the move of the value of the underlying index and overreaction to change of the local market.The underreaction to the change of the underlying index has several explanations, but the overreaction to local market, however, can't be explained by standard finance.Overreaction and underreaction are two important anomalies in the stock market, the research on overreaction and underreaction has been carried on for 20 years, empirical studies show that there are overreactions and underreations in many stock markets. Based on the cognition biases and irrational of investor, the behavioral finance gave explanations for the anomalies.International ETF is different from stock,its overreaction and underraction has its own particular form and measurement.This article bring out the course of the anomalies by the vision of behavior finance.This article uses both the empirical method and simulation method.After the depiction of the investors, this article conduct an experiment through platform of Netlogo,and finally confirm the explanation.