Date of Award
5-2015
Degree Type
Thesis
Degree Name
Master of Science (MS)
Department
Economics and Finance
Committee Chair(s)
Tyler Brough
Committee
Tyler Brough
Committee
Ben Blau
Committee
Ryan Whitby
Abstract
Is financial innovation good or bad? Finance research analyzes data in an attempt to answer this and many other questions. This paper seeks to determine at least a partial answer to this question for one particular financial innovation, the inverse ETF. We look at how the introduction of the first inverse ETF affects the market quality of the component stocks. We find that volatility and illiquidity of the component stocks decreases relative to the rest of the market, on average, after the introduction of the first inverse ETF. We also find that short selling increases in the component stocks relative to the rest of the market. We further our analysis and find that there is a positive relationship between the increased level of short selling and both volatility and liquidity. Therefore, we conclude that the improved market quality of the component stocks is attributable directly to the inverse ETF and not to the increased level of short selling.
Recommended Citation
Woodward, Darren J., "Inverse ETFs and Market Quality" (2015). All Graduate Plan B and other Reports, Spring 1920 to Spring 2023. 666.
https://digitalcommons.usu.edu/gradreports/666
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