The Advent of ETFs in an Imperfect Market

Abstract

Over the last decade or so, China's importance to the world economy has increased substantially. Deemed much too big to ignore, and given its outsized growth and considerable need for capital, China has been garnering sizeable attention on the part of investors, hence turning its markets into increasingly important destinations for their investments. In response, China has opened up innovative investment products such as exchange-traded funds (ETFs). Now investors have an opportunity to broaden their exposure to China through the relatively new iShares FTSE/Xinhua China 25 Index Fund and PowerShares Golden Dragon Halter USX China, respectively listed on the New York Stock Exchange and the American Stock Exchange.