Description
Title: Evaluating the South African Exchange-Traded Funds’ Liquidity Response to Country Risk Effects
Abstract: The health of national economies and the stability of financial markets depend on liquidity. However, country risk shocks may have an impact on the liquidity of financial markets through information asymmetry, funding restrictions, and portfolio rebalancing activities. The goal of this study is to ascertain how disaggregated country risk components affect the exchange-traded fund (ETF) market’s liquidity in South Africa. Specifically, ETFs with domestic benchmarks and ETFs with international benchmarks are divided into separate categories in the sample of South African ETFs. According to the panel Autoregressive Distributed Lag (ARDL) model’s findings, all country risk factors have a positive long-term impact on the liquidity of ETFs that track domestic benchmarks, but only political and financial risks have a positive short-term impact. Similar to how financial risk has a long-term positive impact, political and economic risk shocks have a long-term negative impact on the liquidity of ETFs tracking international benchmarks. These results suggest that by considering the stability of political, financial, and economic risks, investors can enhance the overall performance and liquidity of their portfolios.
Keywords: economic risk; exchange-traded fund; financial risk; market return; political risk
Paper Quality: SCOPUS / Web of Science Level Research Paper
Subject: Economics
Writer Experience: 20+ Years
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