Participants’ Knowledge about Exchange Traded Funds: An Evidence from Karachi Stock Exchange

Abstract

This study investigates and highlights the factors differentiating professional investors from retail investors, causing overall deficiency in overall investors’ knowledge about Exchange Traded Funds at Karachi Stock Exchange. Participants to the study are Authorized Participants, including brokers listed under the regulations of Karachi Stock Exchange Guarantee Ltd. Currently, out of 200 listed brokers 50% were conveniently selected as participants to this study. Likert scaled questionnaires were floated to have their responses. Mean response to all examined variables was more than 3 which lead us to the understanding that all participants were somehow agreed that there exist knowledge deficiency in Pakistan’s ETFs market. Among all factors ranging from SECP Regulations, KSE Regulations to Trading Strategies, on average the factor, Trading Strategies with highest mean response of 3.34 indicated that respondents were more confident about deficiency of knowledge in Trading Strategies at KSE and Authorized Participants or investors at KSE has to consistently develop and improve the existing level of knowledge. Participants’ consistency levels about knowledge deficiencies in all variables (i.e. overall investors' knowledge, SECP Regulations, KSE Regulations and Trading Strategies) have 10.53%, 10.37%, 13.21% and 15.56% coefficients of variations respectively. This shows that participants’ responses were more consistent about the deficiency in understanding SECP regulations followed by investors’ overall knowledge. Spearman’s Correlation coefficient for all independent variables at 5% significance level with P-value < 0.5 were (knowledge deficiency in SECP Regulations r =0.547 , deficiency in KSE Regulation r =0.533, knowledge deficiency in understanding ETFs Trading Strategies with r =0.536) found statistically significant. Hypotheses for significance influence of independent variable on dependent variable were also tested to support the findings.