Exchange-Traded Funds on European Markets: Has Critical Mass been Reached? Implications for Financial Systems
Exchange-traded funds (ETFs) are one of the most rapidly expanding categories of financial products in Europe. One of the key yet still unanswered questions is whether European ETF markets have reached the size at which they could affect the financial systems. In our study, we examine 13 European co...
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| Format: | Article |
| Language: | English |
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MDPI AG
2020-06-01
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| Series: | Entropy |
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| Online Access: | https://www.mdpi.com/1099-4300/22/6/686 |
| _version_ | 1797564753590091776 |
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| author | Adam Marszk Ewa Lechman |
| author_facet | Adam Marszk Ewa Lechman |
| author_sort | Adam Marszk |
| collection | DOAJ |
| description | Exchange-traded funds (ETFs) are one of the most rapidly expanding categories of financial products in Europe. One of the key yet still unanswered questions is whether European ETF markets have reached the size at which they could affect the financial systems. In our study, we examine 13 European countries during the period 2004–2017 in order to trace whether the share of ETFs in the total assets of investment funds has reached the ‘critical’ level that makes possible their further growth and can be associated with an influence on the financial system. We use a novel methodological approach that identifies the ‘critical mass’ along diffusion trajectories. Our results show that, in 10 countries, the share of ETFs in assets of investment funds increased. Still, in most countries, the share of ETFs did not exceed 1%. Estimates of the diffusion models indicate that the process of growing shares of ETFs was most dynamic and relatively most stable in Switzerland and United Kingdom. Results of the critical mass analysis imply that its achievement may be forecasted exclusively in these two cases. However, even in such cases there is no substantial evidence for a possible significant influence of ETFs on the local financial systems. |
| first_indexed | 2024-03-10T19:02:22Z |
| format | Article |
| id | doaj.art-8fd3dea22aa94b32b452fb1972436930 |
| institution | Directory Open Access Journal |
| issn | 1099-4300 |
| language | English |
| last_indexed | 2024-03-10T19:02:22Z |
| publishDate | 2020-06-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Entropy |
| spelling | doaj.art-8fd3dea22aa94b32b452fb19724369302023-11-20T04:21:53ZengMDPI AGEntropy1099-43002020-06-0122668610.3390/e22060686Exchange-Traded Funds on European Markets: Has Critical Mass been Reached? Implications for Financial SystemsAdam Marszk0Ewa Lechman1Faculty of Management and Economics, Gdansk University of Technology, Narutowicza 11/12, 80-233 Gdansk, PolandFaculty of Management and Economics, Gdansk University of Technology, Narutowicza 11/12, 80-233 Gdansk, PolandExchange-traded funds (ETFs) are one of the most rapidly expanding categories of financial products in Europe. One of the key yet still unanswered questions is whether European ETF markets have reached the size at which they could affect the financial systems. In our study, we examine 13 European countries during the period 2004–2017 in order to trace whether the share of ETFs in the total assets of investment funds has reached the ‘critical’ level that makes possible their further growth and can be associated with an influence on the financial system. We use a novel methodological approach that identifies the ‘critical mass’ along diffusion trajectories. Our results show that, in 10 countries, the share of ETFs in assets of investment funds increased. Still, in most countries, the share of ETFs did not exceed 1%. Estimates of the diffusion models indicate that the process of growing shares of ETFs was most dynamic and relatively most stable in Switzerland and United Kingdom. Results of the critical mass analysis imply that its achievement may be forecasted exclusively in these two cases. However, even in such cases there is no substantial evidence for a possible significant influence of ETFs on the local financial systems.https://www.mdpi.com/1099-4300/22/6/686diffusionfinancial innovationscritical massexchange-traded fundsinvestment funds |
| spellingShingle | Adam Marszk Ewa Lechman Exchange-Traded Funds on European Markets: Has Critical Mass been Reached? Implications for Financial Systems Entropy diffusion financial innovations critical mass exchange-traded funds investment funds |
| title | Exchange-Traded Funds on European Markets: Has Critical Mass been Reached? Implications for Financial Systems |
| title_full | Exchange-Traded Funds on European Markets: Has Critical Mass been Reached? Implications for Financial Systems |
| title_fullStr | Exchange-Traded Funds on European Markets: Has Critical Mass been Reached? Implications for Financial Systems |
| title_full_unstemmed | Exchange-Traded Funds on European Markets: Has Critical Mass been Reached? Implications for Financial Systems |
| title_short | Exchange-Traded Funds on European Markets: Has Critical Mass been Reached? Implications for Financial Systems |
| title_sort | exchange traded funds on european markets has critical mass been reached implications for financial systems |
| topic | diffusion financial innovations critical mass exchange-traded funds investment funds |
| url | https://www.mdpi.com/1099-4300/22/6/686 |
| work_keys_str_mv | AT adammarszk exchangetradedfundsoneuropeanmarketshascriticalmassbeenreachedimplicationsforfinancialsystems AT ewalechman exchangetradedfundsoneuropeanmarketshascriticalmassbeenreachedimplicationsforfinancialsystems |