answer the questions

What are Exchange-Traded Funds?

Exchange-traded funds are investment securities traded in a similar manner to shares and stocks. Exchange-traded funds track the performance of share indices, commodities, assets, and bonds among others.

Cost-effective and tax efficient

ETF provide investors with an opportunity to speculate on the income they would receive at the end of their investment period.

ETF provide hedging platform

What are Exchange-Traded Funds?

Exchange-traded funds also provide diversification options for investors. Diversification ensures that investors can trade in separate investment securities simultaneously. The ability of exchange-traded funds to track the performance of various investment securities provides a platform for investors to diversify their investments.

When and why did these funds develop?

ETF was first occurred in 1990 in Toronto Stock Exchange.

The development of ETF due to the increased interest by the public to invest in funds that tracked a wide variety of asset classes.

After the successful launched in Canada, the United States launched its first ETF in 1993, and continue to become mature.

The full development of ETF means that more new funds will have to gain market share based on relatively narrow and more creative market.

How large is the Exchage-Traded Funds market?

ETF grew to 102 from 1993 to 2002. It grew at a rate of 10% every year.

In 2009, ETF reached a high of almost 1000 in less than 10 years.

The development of the high technology has driven the rise of the ETF.

The gradual growth of about 10% in the 1990’s rose to about 100% in the early 2000’s, and the funds reached 1400 in 2011.

ETF has developed rapidly in the North American stock market. There are nearly 3000 products in the market as of January 2018.

According to the data, more than 465 billion US dollars of new funds flowed into the US listed ETF as of the end of 2017.

Replace traditional mutual funds

Exchange-traded funds trade throughout the day, unlike mutual funds that trade at the end of the day.

Exchange-traded funds have low operational costs compared to mutual funds.

Exchange-traded funds do not require minimum investments

Exchange-traded funds enjoy tax efficiency and capital gains

Reference

https://zhuanlan.zhihu.com/p/38545877

Ben-David, I., Franzoni, F., & Moussawi, R. (2017). Exchange-traded funds. Annual Review of Financial Economics, 9, 169-189.

Da, Z., & Shive, S. (2018). Exchange traded funds and asset return correlations. European Financial Management, 24(1), 136-168.

Madhavan, A., & Sobczyk, A. (2016). Price dynamics and liquidity of exchange-traded funds. Journal of Investment Management, 14(2): 1–17

Meziani, A. S., & Meziani. (2016). Exchange-traded funds. Palgrave Macmillan.