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Prof. Shum Nolan’s main area of research focuses on the relationship between financial and real decisions. This relationship is an important consideration for firms, as well as for households. At the firm level, she has studied the choice of capital structure and its effects on a firm’s investment, and vice versa. At the household level, she has studied the impact of entrepreneurial and real estate investments on household portfolio choice. In recent years, Prof. Shum Nolan has also been studying the performance and growth of exchange-traded funds (ETFs) and their roles in investors’ portfolios, as well as their impact on financial markets. Prof. Shum Nolan’s research has appeared in the Journal of Finance, Journal of Monetary Economics, Review of Finance, and Journal of Banking and Finance, among others. She has also published in the areas of pensions, political events and financial markets, and alternative assets, such as art as an investment (focusing on modern art). She was the winner of the CFA Toronto Society-Hillsdale Investment Management Research Award in 2011, and again in 2019.
Honours
2011, 2019 Toronto CFA Society - Hillsdale Research Award
2011, 2010, 2009, 2008, 2006, 2003, 2002, 2001 Merit Awards, Schulich School of Business, York University.
2001 Research Award, Schulich School of Business, York University.
Recent Publications
Broman, M. and Shum, P. (2018), "Relative Liquidity, Fund Flows and Short‐Term Demand: Evidence from Exchange‐Traded Funds", The Financial Review, 53(1), 87-115.
Abstract
We show that highly liquid Exchange‐Traded Funds (ETFs), especially those that are more liquid than their underlying basket of securities (i.e., positive relative liquidity), are particularly attractive to investors. Using three definitions of liquidity, we find that relative liquidity predicts net fund flows, as well as inflows and outflows positively and significantly. We further document a liquidity clientele among institutional investors: (i) relative liquidity is significantly more important for short‐ than for long‐term investors; and (ii) relative liquidity is inversely related to investors’ average holding duration in the ETFs. These two findings provide evidence that relative liquidity encourages short‐term demand.
Hayanto, E., Hejazi, W., Rodier, A. and Shum, P. (2016), "Intraday Share Price Volatility and Leveraged ETF Rebalancing", Review of Finance, 20(6), 2379-2409.
Abstract
Regulators and market participants are concerned about leveraged exchange-traded funds (ETFs)’ role in driving up end-of-day volatility through hedging activities near the market’s close. Leveraged ETF providers counter that the funds are too small to make a meaningful impact on volatility. For the period surrounding the financial crisis, 2006–11, we show that end-of-day volatility was positively and statistically significantly correlated with the ratio of potential rebalancing trades to total trading volume. The impacts were not all economically significant, but largest during the most volatile days. Given the predictable pattern of leveraged ETF hedging demands, implications for predatory trading are explored.
Kang, J. and Shum, P. (2013), "The Performance of Leveraged and Inverse ETFs During Volatile Times", Managerial Finance, 39(5), 476-508.
Abstract
Leveraged and inverse ETFs (hereafter leveraged ETFs) have received much press coverage of late due to issues with their performance. Managers and the media have focused investors’ attention on the impact of compounding, when the funds are held for more than one day. The aim of this paper is to lay out a framework for assessing the performance of leveraged ETFs.
Chen, K. and Shum, P. (2012), "All are Not Created Equal: an Exploration of ETF Asset Growth", Journal of Index Investing, 3(3), 49-61.
Abstract
Exchange-traded funds (ETFs) are unique pooled investments. They are traded on a stock exchange, and their shares can be created and redeemed accordingly to demand. Unlike mutual funds, ETFs appeal to both retail and institutional investors. In this article, we examine the drivers of ETF asset growth. In particular, we compare the growth path of ETFs that track an identical underlying index. Our results suggest that individual ETF asset growth is driven not only by asset returns but also by a host of financial/technical and investor attention variables. Importantly, the extent of the influence of specific drivers is conditional on an ETF’s growth stage and clientele. We also explore measurable factors that may influence investor attention.
Courses Taught
FINE3200 and FINE6200 Investments
Pauline M. Shum Nolan
Professor of Finance