The Empirical Study On ETF Price Changes In China

ETF is short for Exchange-Traded Funds. As the first domestic exchange-tradedfund，Shangzheng50ETF released in2004, ETF has long been a hotspot in theacademic circle and the investment field. Studies on ETF have developed fromregulation and supervision to their investment value, arbitrage and profitability. Dueto the high frequency data of financial transactions, studies on ETF go a step further.One of the significant characteristics of ETF is their double trading mechanism,which means investors can not only purchase and redeem ETF from primary markets,but also buy and sell them in exchanges. According to China’s financial regulationson ETF, the minimum stock exchange price is￥0.001, which leads to the discretenessof the ETF transaction price.The paper is aimed to reveal the law of price changes，by analyzing thediscreteness of domestic ETF transaction price and empirical results of ETF pricechanges. Firstly, the development of ETF in China is briefly reviewed, including theirmain characteristics, transaction mechanisms, and the performance of ETF in theprimary and secondary markets in China. Next, the influence of discreteness on ETFprice is revealed, in which the price clustering of ETF is examined with highfrequency data and the characteristics of price changes are analyzed. It is concludedthat there is no price clustering in the domestic ETF market, of which the root causelies in the absence of price manipulation. Then, the ordered probit model and ADSmodel are used to dig into the factors in ETF price changes. The empirical resultsshow that ETF price，to a large extent, under the influence of which includes IOPVchanges, lagging price changes, transaction direction and trade volume. Finally, somesuggestions are given to improve the development of domestic ETF.