The Implementation of Exchange Traded Funds in the European Market

Until the first Exchange Traded Fund (ETF) was introduced to the European market in April 2000, the term ETF was not familiar to the majority of investors and industry professionals. Only a few years later, ETFs have become the standard in modern portfolio management. This dissertation analyses how passively managed, equity-based ETFs that mirror the yield and the performance of European indices were implemented on the European market. It discusses the characteristics of ETFs, the fragmented nature of the European market, and the various investment approaches available to institutional and individual investors. The study also presents an empirical analysis of the ability of a special group of ETFs to closely mirror their benchmark, studies how accurate the price-building process of this group of ETFs is, and examines the potential for arbitrage. The dissertation presents several scenarios for the future development of ETFs in the context of the European market and discusses the major implications of the emergence of these new products for the local index fund industry. Finally, it offers recommendations for further research and empirical analysis on the topic.

Autorentext

Rossitza Tzvetkova, PhD.Received her doctoral degree from the University of St. Gallen(HSG), Switzerland in 2005. Currently working as a Product Developer at Swisscanto AG,a leading Swiss investment fund company.