Why Don’t Investors Trade ETF
周行一 Edward H. Chow
Professor of Finance, NCCU
Dean of College of Commerce
2006/7
No. of Investors trading different categories of
stocks post ETF
單位：人次
Percentage of Investors trading different
categories of stocks post ETF
Percentage of Investors trading different
categories of stocks post ETF
70.00%
only 成份股
only ETF
only Others
60.00%
成份股+Others
ETF+Others
50.00%
成份股+ETF
成份股+ETF+Others
40.00%
30.00%
20.00%
10.00%
200412
200411
200410
200409
200408
200407
200406
200405
200404
200403
200402
200401
200312
200311
200310
200309
200308
200307
20030630
0.00%
No. of Investors trading ETF and other stocks post
ETF
單位：人次
Percentage of Investors trading ETF and other
stocks post ETF
Percentage of Investors trading ETF and other
stocks post ETF
0.50%
only ETF
0.45%
ETF+Others
成份股+ETF
0.40%
成份股+ETF+Others
0.35%
0.30%
0.25%
0.20%
0.15%
0.10%
0.05%
200412
200411
200410
200409
200408
200407
200406
200405
200404
200403
200402
200401
200312
200311
200310
200309
200308
200307
0.00%
No. of NEW Investors trading different
categories of stocks post ETF
Percentage of NEW Investors trading different
categories of stocks post ETF
新進入市場投資人(新市場)投資在成份股、ETF與其
他證券佔當月新市場總人數的比重
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
new_成份股
new_ETF
new_Others
new_成份股+others
new_ETF+Others
new_成份股+ETF
200412
200411
200410
200409
200408
200407
200406
200405
200404
200403
200402
200401
200312
200311
200310
200309
200308
200307
200306
0.00%
new_成份股+ETF+Others
Percentage of NEW Investors trading ETF and
other stocks post ETF
Percentage of NEW Investors trading ETF and
other stocks post ETF
0.60%
new_ETF
new_ETF+Others
new_成份股+ETF
0.50%
new_成份股+ETF+Others
0.40%
0.30%
0.20%
0.10%
200412
200411
200410
200409
200408
200407
200406
200405
200404
200403
200402
200401
200312
200311
200310
200309
200308
200307
0.00%
New investors as a percentage of total no. of
investors in different categories of stocks
New investors as a percentage of total no. of
investors in different categories of stocks
25.00%
only成份股
ETF
Others
20.00%
成份股+Others
ETF+Others
成份股+ETF
15.00%
成份股+ETF+Others
10.00%
5.00%
200412
200411
200410
200409
200408
200407
200406
200405
200404
200403
200402
200401
200312
200311
200310
200309
200308
200307
0.00%
Theoretical reasons for people to trade
ETF
• Diversification
• Low transaction cost
–Barring tax considerations (Taiwan does
not have capital gain tax), for wealthy
long-term investors cost of diversified
portfolio could be lower than that of ETF
(due to management fee of ETF)
• Trading strategy
• Arbitrage
Empirical findings on the ETF in Taiwan
• Weekly tracking error is about 0.862 basis
point
–Annual tracking error is about 28.4 basis
points from 1993 to 1998 (Elton et al.)
• Cash dividend seems to be the villain for
the tracking error in Taiwan
• Premium/discount has improved since the new
block trade rule and the exemption of uptick rule for the ETF component stocks
Suggestions for increasing the demand
for ETF
• Market ETF with the help of financial
planners
• Increase the frequency of
distribution of cash dividend to ETF
investors
• Reduce the management fee of ETF
• Improve trading mechanism – e.g.,
block trade, price limit, and offexchange trading, etc.
結論及Q&A
• Thank you for your attention
• Have a wonderful life