Are Modifications in the ETF's Investment Performance and Risks during the COVID-19 Pandemic Event?

ETF'S INVESTMENT PERFORMANCE AND RISK ON COVID-19 EVENT

DOI: https://doi.org/10.54609/reaser.v23i1.202
Keywords: Cross-Border ETF, Effect of COVID-19 Pandemic, Modified Jensen’s Alpha, Systematic Risk, Investment Performance

Abstract

This study focuses on the impact of the COVID-19 pandemic on the investment performance and systematic risk of ETFs. As a result of the early stages of the COVID-19 outbreak, the impact in China was much greater than that in Taiwan. Therefore, by two ETFs investing higher weighted stocks in the Shanghai and Taiwan markets, the ETFs are used to explore the COVID-19 pandemic effect on the two stock markets. Jensen’s alpha and the modified model by Jensen (1968) are coupled with GARCH(1,1) to modify and test ETF’s performance and systematic risk. The empirical results show that ETF50 performance may be overestimated by using Jensen’s alpha. According to the results of modified Jensen's alpha, there is no evidence that abnormal returns are significantly nonzero in both ETFs and that alpha values have not been changed by the COVID-19 event. After the COVID-19 pandemic began, the SSE50 ETF’s systematic risk significantly increased, and the asset size of funds significantly decreased. Therefore, the results supported the significant impact of the COVID-19 pandemic on the SSE50 ETF. There is evidence that the SSE50 ETF affects COVID-19 events, and this result echoes the more severe areas of the COVID-19 pandemic in China.

Author Biographies

Dr. Ying-Sing LIU, Chaoyang University of Technology

Ying Sing LIU is a researcher at the College of Humanities & Social Sciences of Chaoyang University of Science and Technology, Taiwan. Liu, Ying-Sing, is a Ph. D. in management at the National Yunlin University of Technology. During college, he majored in applied mathematics and specialized in modeling, management, and finance. In the past, has published more than 20 international and domestic academic papers.

Prof. Liza LEE, College of Humanities & Social Sciences, Chaoyang University of Technology, Taiwan

Liza LEE, College of Humanities and Social Sciences, Chaoyang University of Technology, Taiwan. Dr. Liza Lee is the Dean of the College of Humanities and Social Sciences and a Professor at Chaoyang University of Technology in Taichung, Taiwan. She is a graduate of Teachers College, Columbia University. Her work has led to ongoing invitations to lecture at prestigious universities, conferences, and seminars worldwide.

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Published
2022-06-27
How to Cite
Liu, Y.-S., & Lee, L. (2022). Are Modifications in the ETF’s Investment Performance and Risks during the COVID-19 Pandemic Event?. Review of Applied Socio-Economic Research, 23(1), 5-17. https://doi.org/10.54609/reaser.v23i1.202
Issue
Vol 23 No 1 (2022): Review of Applied Socio-Economic Research
Section
Articles

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