Open Research Questions in Environmental Economics

ROBERT T. DEACON, DAVID S. BROOKSHIRE, ANTHONY C. FISHER,
ALLEN V. KNEESE, CHARLES D. KOLSTAD, DAVID SCROGIN,
V. KERRY SMITH, MICHAELWARD and JAMES WILEN. 1998. Research Trends and Opportunities in Environmental and Natural Resource Economics. Environmental and Resource Economics 11(3–4): 383–397.

This article appears to be the basis for a lively discussion.

The ETF Advantage

The Economist has a short piece on the ETF movement leading this week's Finance and Economics section. Proponents (Lee Kranefuss at Barclay's Global, e.g. http://www.indexfunds.com/articles/20000925_kranefuss_iss_int_LK.htm) tell us that ETFs essentially offer the same advantages that a mutual fund tracking a particular commodity, market, industry, etc., would. The difference highlighted in the Economist article is that ETFs offer prices that fluctuate throughout the day and are as such rebalanced more aggressively throughout the day than mutual funds. It is suggested that even though this rebalancing calls for more active management, the management that is called for is less expensive than that of mutual funds (beta is cheaper than alpha). So the advantages seem clear. The Economist article lists the notable drawbacks as well. Lack of liquidity due to an ETF following a niche market seems to be an important one. The other drawback that is featured in the article is the tendency for ETF share prices to diverge from their target due to purchase of too concentrated a portfolio. For instance, an oil industry ETF might diverge from its target if it invested too heavily in a particular company, e.g. Shell, which then experienced an event very specific to Shell that caused its share price to move against the rest of the industry.