ETFs: Analysis of Timing and Length of Investment
| Název práce v češtině: | ETFs: Analýza Načasování a Délky Investice |
|---|---|
| Název v anglickém jazyce: | ETFs: Analysis of Timing and Length of Investment |
| Klíčová slova: | ETF, ETP, načasování investice, délka investice |
| Klíčová slova anglicky: | ETF, ETP, investment timing, length of investment |
| Akademický rok vypsání: | 2020/2021 |
| Typ práce: | bakalářská práce |
| Jazyk práce: | angličtina |
| Ústav: | Institut ekonomických studií (23-IES) |
| Vedoucí / školitel: | PhDr. František Čech, Ph.D. |
| Řešitel: | skrytý - zadáno vedoucím/školitelem |
| Datum přihlášení: | 30.09.2021 |
| Datum zadání: | 30.09.2021 |
| Datum a čas obhajoby: | 06.09.2022 09:00 |
| Místo konání obhajoby: | Opletalova - Opletalova 26, O206, Opletalova - místn. č. 206 |
| Datum odevzdání elektronické podoby: | 02.08.2022 |
| Datum proběhlé obhajoby: | 06.09.2022 |
| Oponenti: | Mgr. Josef Švéda |
| Kontrola URKUND: | |
| Seznam odborné literatury |
| Ferri, Richard A., 2008. The ETF book: all you need to know about exchange-traded funds; ISBN 978-0-470-13063-6.
Hatch, C., Carlson, K. and Droms, W., 2018. Effects of market returns and market volatility on investor risk tolerance. Journal of Financial Services Marketing, 23(2), pp.77-90. Lundblad, C., 2007. The risk return tradeoff in the long run: 1836–2003. Journal of Financial Economics, 85(1). Mignolet, A., 2015. A study of the performance of exchange traded funds. [ebook] p.77. Available at: <http://hdl.handle.net/2268.2/1416> [Accessed 28 September 2021]. Rompotis, Gerasimos Georgiou, The Seasonal Patterns in ETFs Performance, Volatility and Trading Activity (2007). Available at SSRN: https://ssrn.com/abstract=983467 or http://dx.doi.org/10.2139/ssrn.983467 |
| Předběžná náplň práce v anglickém jazyce |
| Research question and motivation
Exchange Traded Funds (ETFs) are one of the common ways for investment with their specific advantages and disadvantages. The key advantage is easy access to ETF, hence they represent a relatively cheap, comfortable and widely used investment instrument (Ferri, Richard A.; 2008). They are also professionally managed and they do not require manual adjustments compared to stock portfolios. The main disadvantages are risks connected to ETFs, such as credit or liquidity risks, which highly affect the volatility and therefore profits of ETFs (Hatch, C., Carlson, K. and Droms, W.; 2018). Also, as Gerasimos G. Rompotis (2007) states: The effect of volatility of ETFs fluctuates rather irregularly among all the months in a year. Therefore, the author will also examine different starting points of an investment period. In this thesis the author firstly introduces ETFs as an investment instrument and states their advantages and disadvantages compared to other similar investment instruments. Secondly, he will analyse ETFs grouped into portfolios by specific characteristics. These portfolios will be differentiated by their volatility, length of an investing period and the starting date of the period. The analysis is going to compare profits of various groups of ETFs. The author will try to identify which of these criteria of division has the most significant influence on the performance of ETFs and which combinations are superior to others. This thesis was inspired by the hypothesis that the market is growing in the long run and that higher risks are connected with higher rewards (Lundblad, Christian; 2007). The author expects that shorter periods will be more dependent on the starting date than the longer ones. Furthermore, he expects that the portfolio with the highest volatility will be inferior to portfolios with lower volatility during the crisis. Contribution This thesis will deeply examine and explore the properties of ETF data between 2000 and 2019. The author will follow the work of the above-mentioned studies, verify that their findings are in line with his results and try to challenge the statement of Christian Lundblad (2007) that conditional volatility has almost no explanatory power for future realized returns. Further, this analysis will help to define which combination of volatility and period length is superior for a specific phase of the economic cycle. The outcome of this thesis may also work as a basis for future research in ETF volatility portfolio optimization. Methodology For the analysis the author will use free available ETF data from Yahoo finance. Chosen data from 2000 to 2019 will be divided into various subperiods by length and starting date. There will be several different starting points and each of them will be linked with multiple investment periods of distinct lengths. In each of these periods, ETFs with similar volatility will be grouped and the properties of portfolios will be analysed. The author will also study the dependence structure among the groups as well as among periods. The standard time series techniques such as dynamic conditional correlation GARCH will be used for the analysis. Outline 1. Abstract 2. Introduction 3. ETFs a. What are ETFs b. Differences among similar investment instruments (Hedge fund, index fund, fund of funds…) c. Pros d. Cons e. Types of ETFs f. Risks connected to ETF 4. Methodology of analysis a. Used data b. Selection of periods c. Volatility groups d. Correlations 5. Results and their interpretation 6. Conclusion |