Recent developments in exchange-traded fund literature Pricing efficiency, tracking ability, and effects on underlying securities

Purpose - The purpose of this paper is to provide a brief review of three strands of the literature on exchange-traded funds. Design/methodology/approach - The paper starts with a review of the history of the growth of exchange-traded funds and their characteristics. The paper then examines the key factors and findings of the existing studies on, respectively, the pricing efficiency, the tracking ability/performance, and the impact on underlying securities of exchange-traded funds. Findings - Although there has been a substantial amount of research conducted to advance our knowledge on the trading, management, and effect of exchange-traded funds, the findings are still far from conclusive in addressing a number of research questions. Practical implications - Investors and other market participants will find this review informative in enhancing the understanding of exchange-traded funds. Originality/value - By highlighting the general theme of the related research findings, the paper provides a systematic review of the existing literature that future researchers can utilize in developing their research agenda.