Active Management and Price Efficiency of Exchange-traded Funds

Abstract

This paper extends the debate over the benefi ts of active management by investigating its impact on price effi ciency using data from available ETFs traded on the US market. After accounting for various tests in terms of price effi ciency, we fi nd that active management matters to the effi ciency improvement. One practical implication of this study is that more active management element might be considered by fund managers in designing and managing their ETFs so as to refl ect all available information into fund prices.