Impact of Taiwan Top 50 Tracker Fund on the Component Stocks of Taiwan 50 Index

• Main Authors: Ching-Chung Lin, 林靖中
• Other Authors: Min-Hsien Chiang
• Format: Others
• Language: zh-TW
• Published: 2005
• Online Access: http://ndltd.ncl.edu.tw/handle/08165978148588430167

博士 === 國立成功大學 === 企業管理學系碩博士班 === 93 === 　　The Taiwan Stock Exchange (TSE) introduced the first Taiwanese ETF --- “Taiwan Top 50 Tracker Fund” (TTT) on June 30, 2003. The underlying index of TTT is the Taiwan 50 Index, which is calculated using the trade prices of the largest 50 listed companies by total market value. To understand the impact of TTT on the financial market, the purpose of this dissertation is: (1) to study the pricing efficiency of TTT, which is defined as the difference between the net present value and the market value of TTT; (2) to investigate the liquidity and the volatility changes of the component stocks of the Taiwan 50 Index by using different measurements of liquidity and volatility; and (3) to explore whether the component companies with different characteristics have different changing patterns. 　　To investigate the pricing efficiency of TTT, the daily data of net present values and market prices of TTT from 2003/6/30 to 2004/6/30 are used. The five-minute intraday data from 2003/4/1 to 2003/9/30 is employed to explore the liquidity and the volatility change of the component stocks after the introduction of TTT. This study uses the methodology of regression, the premium percentage, and the absolute mispricing percentage to explore the pricing efficiency of TTT. The bid-ask tick, trading volume and value, Amivest liquidity ratio, and Martin liquidity ratio are employed to measure the liquidity of component stocks of TTT. To evaluate the volatility, the GK (1980) volatility, ABDL (2001) volatility, and unconditional variance of the GARCH model have been computed. The component stocks have been categorized into three groups based on market value or industry to explore whether different categories have different changing levels. 　　The findings and implications of these empirical results are as follows： (1)The empirical result shows that TTT is pricing efficient. The average premium percentage is an insignificant figure of 0.041%. Although the average absolute mispricing percentage of 0.383% is statistically significant, it is not economically significant after considering the arbitrage costs. (2)The liquidity of constituents tends to increase after the introduction of TTT. This is coincidental with the expectation of the index arbitrage hypothesis, which believes that basket security will increase the liquidity of underlying assets because it provides the opportunity of arbitrage. The liquidity changes of different market-value categories are the same. However, evidence supports that the liquidity increases of the electronic and the financial sectors tend to be more. (3)The volatility of component stocks significantly increases after the introduction of TTT. The explanation is that the transaction of TTT increases the information flow and thus the volatility. Still, the changing-patterns of different market-value categories are similar. In addition, this study finds strong evidence showing that the volatilities of the electronic and the financial sectors increase, while that of other industry decreases.