Research On The Influence Of Liquidity Risk On The Return And Tracking Error Of Stock ETFs

Due to the advantages of ETFs such as flexibility,low cost and high efficiency,investors can effectively diversify risks,control investment costs,and achieve crossmarket investment.Therefore,ETFs have received more and more attention and its asset management scale has been soaring.Despite the growing scale of ETFs,most of the funds are still concentrated in a few well-known ETFs,which may lead to a lack of liquidity in some ETFs.Considering the dual characteristics of closed-end funds and stocks of ETFs,the deterioration of liquidity not only can aggravate the tracking error,but also can put the fund under greater pressure of yield compensation.Based on the fund characteristics and data availability,this paper study the impact of liquidity risk of stock ETFs on its tracking error and returns,providing theoretical support for investors to select stock ETFs and reference for policy making.This paper takes the stock ETF funds listed in our country as the research object,uses the multiple linear regression model to analyze the impact of stock ETF funds on its tracking error,and at the same time adopts the capital asset pricing model adjusted by liquidity to analyze the liquidity factor of the stock ETF fund.Through empirical research,the following conclusions have drawn: First,the liquidity of stock ETFs has a negative impact on its tracking error.As the liquidity of stock ETFs increases,its tracking error will also decrease.And this effect is oneway.Second,due to the influence of the stock exchange where the stock ETF fund is located,the single-market stock ETF has better liquidity,and its tracking error is less affected by liquidity.Third,the beta value reflecting liquidity risk increases with the weakening of the liquidity of stock ETF investment portfolios,indicating that illiquid portfolios are more sensitive to changes in market liquidity and market returns;the market risk premium The liquidity risk premium exists significantly in the stock ETF market,and the LCAPM model has applicability in stock ETF market.