Demystifying ETFs: Trends, Risks, and Market Impacts

Dec. 03, 2024

Exchange-Traded Funds (ETFs) have transformed investing, offering a way to invest in diversified portfolios instead of single stocks or bonds. However, the rise of ETFs—especially “specialized” ETFs—can have market-wide impacts, including increased price volatility, warns Ohio State University’s Itzhak Ben-David.

During his visit to Stockholm, Itzhak Ben-David spoke with the Swedish House of Finance to discuss ETF trends, risks, and market impacts. Key insights included:

• The growing popularity of ETFs and their appeal to investors.
• The risks of specialized ETFs, which often lead to disappointing returns and should be approached with caution.
• How ETFs’ accessibility amplifies demand for underlying securities, increasing price volatility and driving market-wide impacts.
• Emerging trends and what’s next for the ETF space.