Spatial Comovement Contagion of Trading Characteristics of ETF Underlying Securities Based on Network Structure:Evidence from China
This study examines the spatial spillover effect of Exchange Traded Fund(ETF)ownership on the co-movement of trading characteristics,including liquidity,trading volume,and returns of underlying stocks.Using Spatial Autoregressive Model analyses of time-varying spatial 0-1 matrices and spatial-weighted matrices,we uncover the net-work structure among ETF underlying securities.Our findings demonstrate that ETFs induce comovement spillover ef-fects in the rate of return,trading volume,and liquidity of the underlying stocks,propagated through their network rela-tionships.Observations over three periods reveal that as the number of ETFs increases and more stocks are included as ETF constituents,the spatial relationships among stocks strengthen,leading to greater comovement contagion of trading characteristics.These trends highlight dynamic spillover effects within the ETF underlying security space network.Mul-tiple robustness tests and an endogeneity test confirm the validity of our results.Mechanism analysis indicates that ETF arbitrage activities are a key micro-mechanism driving the increase in spatial comovement contagion.This study en-hances the understanding of micro-level comovement contagion within ETF shareholding networks,enriching insights into stock market linkages and capital market dynamics.By exploring the ETF perspective,the research underscores the significant impact of underlying network structures on stock comovement contagion and the comprehensive influence of institutional investor shareholding structures on financial stability.
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