Exchange Traded Fund – Definition

Cite this article as:"Exchange Traded Fund – Definition," in The Business Professor, updated May 20, 2019, last accessed May 25, 2020, https://thebusinessprofessor.com/lesson/exchange-traded-fund-definition/.

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Exchange Traded Fund (ETF) Definition

An Exchange Traded Fund (ETF) is an investment fund or a security that tracks an underlying index such as stock portfolio or bonds. An ETF is traded on stock exchanges, ETFs are not shared assets, they are more like stocks that get listed on an exchange. However, when listed on stock exchanges, the prices of Exchange Traded Fund are volatile, they fluctuate as they are traded in the market.

ETFs are funds or securities used to track the performance of a stock portfolio or an asset. Some ETFs serves as resources for securities and commodities markets. ETFs are often attractive to investors or financial specialists because they are traded in high volume and at lower costs than mutual funds.

A Little More on What is an Exchange Traded Fund (ETF)

In the United States, ETFs are subject to the regulations of the Investment Company Act of 1940. Majority of ETFs are offered as open-ended funds while some are issued as Unit Investment Trusts (UIT). Exchange traded funds are commonly known for their ability to acquire underlying resources such as remote funs, bonds and stocks and divide their ownership in form of assets.

Usually, ETFs set up as UIT have redemption date which is the date it is expected to fully mature, these dates can however be extended. ETFs issued as UIT can act as correspondents to the standard open-ended funds. Profits or premiums are paid on ETFs which investors enjoy. In terms of cost, ETFs are more effective than mutual funds, with the decline in rate of mutual funds in recent times, ETFs are known to me cost effective.

References for Exchange Traded Fund (ETF)

Research article for Exchange Traded Fund (ETF)

Śledząc parkiet-analiza jakości odwzorowania indeksu WIG20 przez pierwszy na polskim rynku fundusz Exchange Traded Fund (ETF), Chodnicka, P., & Jaworski, P. (2012). Problemy Zarządzania, (4/2012 (39)), 198-205.

[PDF] The Potential for Islamic Exchange Traded Fund (ETF) in Indonesia: A comparative study of development in US, UK, and Malaysia, PRAKASA, Y. (2012, June). In International Conference on Islamic Capital Markets (pp. 19-20).

[PDF] ETF-Exchange Traded Fund, BM&FBOVESPA, B. D. M., & Bovespa, F. (2008). São Paulo.

Influence of Exchange Traded Fund (ETF) Splits on Investor Behavior, Estrel, A. (2018). (Doctoral dissertation, The Ohio State University).

Shariah Parameters on Islamic Exchangetraded Fund (ETF) based on Gold and Silver: A Legal Perspective on the Liabilities of Shariah Advisers in Malaysia, Rahman, A. A. (2016). Islam and Civilisational Renewal (ICR), 7(3).

Exchange Traded Fund (Etf) Sebagai Instrumen Alternatif Dalam Investasi Di Pasar Modal Indonesia, Pasaribu, K. E.

… first fun on the Polish market (Sledzac parkiet-analiza jakosci odwzorowania indeksu WIG20 przez pierwszy na polskim rynku fundusz Exchange Traded Fund (ETF)), Chodnicka, P., & Jaworski, P. (2012). Problemy Zarzadzania, 10(39), 198-205.

Exchange Traded Fund (ETF): Inovasi Dalam Dunia Industri Reksa Dana di Indonesia, Rita, M. R. (2008).

Análisis de desempeño del Exchange Traded Fund (ETF) SPDR S&P 500 (SPY) como alternativa de inversión para el pequeño inversionista peruano de fondo mutuo …, Bolívar Falconi, W. L., Escobar Flores, K. F., Castañeda, I., del Carmen, R., & Valcárcel Castro, M. G. (2015).

Predicting the exchange traded fund DIA with a combination of genetic algorithms and neural networks, Versace, M., Bhatt, R., Hinds, O., & Shiffer, M. (2004). Expert systems with applications, 27(3), 417-425.

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