Abstract
Focusing on the Chinese CSI 300 Index and its three exchange traded funds (ETFs), this study examines the relationship between share volumes in the ETF market, efficiency of the tracked stock market, and the role of arbitrage trades in this association. We find that the ETF share volume makes an important contribution to the price efficiency of the tracked stock market. However, this effect is weakened by the arbitrage activity across the markets. Estimating the cumulative impulse response function confirms that the CSI 300 becomes more informative as the share volume increases in the CSI 300 ETF market.
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