Evaluating the Liquidity Response of South African Exchange-Traded Funds to Country Risk Effects
Abstract
:1. Introduction
2. Literature Review
2.1. Conceptualization of Liquidity
2.2. Review of Empirical Studies
3. Data
3.1. Data Sample
3.2. Liquidity Measures
3.3. Disaggregated Country Risk Measures
4. Model Specification
5. Results and Analysis
5.1. Descriptive Statistics
5.2. Cross-Dependence and Unit Root Testing
5.3. Analysis of Long-Run Relationships
5.4. Analysis of Short-Run Relationships
6. Conclusions
Funding
Data Availability Statement
Acknowledgments
Conflicts of Interest
Appendix A. Optimal Lag Length Selection
Appendix A.1. Segment A: ETFs with Domestic Benchmarks
Appendix A.2. Segment B: ETFs with International Benchmarks
1 | Market (or trading) liquidity which relates to how easily a security can be traded is different from funding liquidity which relates to how easily funding can be obtained (Brunnermeier and Pedersen 2009). This study focuses on market liquidity. |
2 | This includes ETFs which track a variety of asset classes including stocks, bonds, real estate, commodities, and currencies. |
3 | The CGREEN and CSEW40 ETFs were removed from the sample due to insufficient data. |
4 | |
5 | Specifically, the magnitudes of the effects of political risk on the Amihud ratio and high–low spread. |
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ETFs with Domestic Benchmarks | ETFs with International Benchmarks | Political Risk Ratings | Economic Risk Ratings | Financial Risk Ratings | |||
---|---|---|---|---|---|---|---|
Amihud Ratio | High–Low Spread | Amihud Ratio | High–Low Spread | ||||
Mean | 0.0730 | 0.0019 | 0.0076 | 0.0032 | 66.3413 | 34.6696 | 38.2022 |
Maximum | 11.2624 | 0.0415 | 0.5753 | 0.0154 | 72.0000 | 38.5000 | 42.0000 |
Minimum | 0.0000 ^ | 0.0000 ^ | 0.0000 ^ | 0.0000 ^ | 61.5000 | 29.0000 | 31.5000 |
Std. Dev. | 0.4002 | 0.0021 | 0.0435 | 0.0023 | 2.6572 | 2.1806 | 1.8996 |
Skewness | 16.2988 | 2.9457 | 9.9137 | 1.5169 | 0.1734 | 0.0453 | −0.6408 |
Kurtosis | 342.0805 | 32.0415 | 111.5863 | 6.6411 | 2.1024 | 2.2203 | 3.2277 |
Jarque-Bera | 22,845,021 | 172,879.1 | 426,444.1 | 787.1047 | 8.8736 | 5.9039 | 16.2383 |
Probability | 0.0000 | 0.0000 | 0.0000 | 0.0000 | 0.0118 | 0.0522 | 0.0003 |
Breusch-Pagan LM | Pesaran Scaled LM | Pesaran CD | Bias-Corrected Scaled LM | |
---|---|---|---|---|
Panel A: ETFs with Domestic Benchmarks | ||||
5219.084 * | 105.0217 * | 18.9311 * | 104.9296 * | |
9057.362 * | 197.5170 * | 44.8418 * | 197.4249 * | |
15,702.53 * | 357.6531 * | 15.0576 * | 357.5610 * | |
8728.886 * | 189.6014 * | 23.2580 * | 189.5093 * | |
7460.380 * | 159.0328 * | 3.7106 * | 158.9407 * | |
Panel B: ETFs with International Benchmarks | ||||
1018.320 * | 153.8898 * | 21.4172 * | 153.8692 * | |
234.8760 * | 33.0018 * | 5.8957 * | 32.9812 * | |
1840.000 * | 280.6778 * | 40.6282 * | 280.6572 * | |
1840.000 * | 280.6778 * | 40.6282 * | 280.6572 * | |
1840.000 * | 280.6778 * | 40.6282 * | 280.6572 * |
ETFs with Domestic Benchmarks | ETFs with International Benchmarks | Decision | |||
---|---|---|---|---|---|
Levels | First Diff. | Levels | First Diff. | ||
−5.8977 * | -- | −3.5392 * | -- | I(0) | |
−6.1900 * | -- | −5.6034 * | -- | I(0) | |
−1.8345 | −2.6732 * | −0.9304 | −4.6783 * | I(1) | |
−0.0855 | −3.6466 * | −0.8698 | −5.2395 * | I(1) | |
−5.4336 * | -- | −3.6757 * | -- | I(0) |
Variable | ETFs with Domestic Benchmarks | ETFs with International Benchmarks | ||
---|---|---|---|---|
Amihud Ratio | High–Low Spread | Amihud Ratio | High–Low Spread | |
Within-dimesion | ||||
Panel v-Stat. | 2.6259 * | 4.6295 * | −1.2682 | 0.8217 |
Panel rho-Stat. | −47.8144 * | −45.8030 * | −11.2359 * | −37.5923 * |
Panel PP-Stat. | −34.6400 * | −29.5472 * | −7.9423 * | −19.5048 * |
Panel ADF-Stat. | −16.0223 * | −11.5614 * | −3.5314 * | −9.7913 * |
Between-dimension | ||||
Group rho-Stat. | −47.2387 * | −53.5373 * | −9.7965 * | −28.7477 * |
Group PP-Stat. | −41.0671 * | −39.8233 * | −9.6779 * | −20.0359 * |
Group ADF-Stat. | −21.3164 * | −19.2236 * | −4.1344 * | −10.1029 * |
Variable | ETFs with Domestic Benchmarks | ETFs with International Benchmarks | ||
---|---|---|---|---|
Amihud Ratio | High–Low Spread | Amihud Ratio | High–Low Spread | |
Optimal Model | ARDL(3,1,1,1) | ARDL(4,1,1,1) | ARDL(4,1,1,1) | ARDL(4,1,1,1) |
9.2243 | −3.6785 | 96.3924 | −17.3035 | |
8.9494 | 0.0745 | −1.7228 | 4.9250 | |
0.0106 | 0.0226 | −49.5644 | −3.0041 |
Variable | ETFs with Domestic Benchmarks | ETFs with International Benchmarks | ||
---|---|---|---|---|
Amihud Ratio | High–Low Spread | Amihud Ratio | High–Low Spread | |
−0.2932 * | −0.4838 * | |||
−0.1503 * | −0.3154 * | |||
−0.1632 * | ||||
−0.4347 * | −0.3331 * | |||
−0.2969 * | −0.1696 ** | |||
−0.1215 * | −0.0458 | |||
1.3688 | 12.1392 ** | 6.0709 | 2.3972 | |
−4.0743 | −4.6523 | −0.2089 | −2.0795 | |
−3.9553 ** | 7.1071 * | −3.4771 *** | 0.1196 | |
−0.4440 * | −0.3552 * | −0.0687 ** | −0.3857 * |
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Kunjal, D. Evaluating the Liquidity Response of South African Exchange-Traded Funds to Country Risk Effects. Economies 2022, 10, 130. https://doi.org/10.3390/economies10060130
Kunjal D. Evaluating the Liquidity Response of South African Exchange-Traded Funds to Country Risk Effects. Economies. 2022; 10(6):130. https://doi.org/10.3390/economies10060130
Chicago/Turabian StyleKunjal, Damien. 2022. "Evaluating the Liquidity Response of South African Exchange-Traded Funds to Country Risk Effects" Economies 10, no. 6: 130. https://doi.org/10.3390/economies10060130