EXCHANGE-TRADED FUNDS: BAD NEWS, GOOD NEWS, OR NO NEWS FOR CLOSED-END FUNDS?

Past findings on World Equity Benchmark hares (WEBS) and their impact on closed-end funds (CEFs) cannot necessarily be generalized for different types of exchange-traded funds (ETFs). This study uses five different event doles in order to examine whether the listing of ETFs has both an immediate and a long-run impact on the market prices of similar-type CEFs. It finds that in contrast to prior expectations, the date of the listing of ETFs is not associated with a negative and statistically significant stock price reaction. Most of the negative price reaction is concentrated on the next trading day and appears to be very short-lived. The CARs surrounding the listing dare and over the next 10 trading dates appear quite volatile with a slight upward drift, while CARs for CEFs over the period of one year are 16.49 percent statistically significant at the 1 percent level. Overall, these findings seem to suggest that investors regard ETFs as a viable investment vehicle but not necessarily an investment alternative to CEFs. Subsequently, past findings based strictly on WEBS cannot be generalized for different types of ETFs.