UNLOCKING THE POTENTIAL: EXPLORING THE IMPACT OF ETF INVESTMENTS ON THE GLOBAL FINTECH LANDSCAPE

Abstract

The COVID-19 pandemic has not only transformed our daily lives but has also acted as a catalyst for the rapid evolution of the FinTech industry. This sector has gained substantial recognition from global investors who are eager to allocate their surplus funds to this domain. This paper aims to examine the FinTech industry from a financial market perspective, specifically focusing on investments in thematic FinTech exchange-traded funds (ETFs). Our analysis centres on two prominent ETFs, namely FINX and ARKF, and compares their performance against the Standard & Poor's 500 stock market index. Notably, the results demonstrate the outperformance of this industry niche, even in the face of strong overall market performance during the pandemic years. Employing a factor regression approach, we implement the Carhart 4-factor model for both ETFs over the period from March 2019 to December 2021. The findings suggest resemblances between the FinTech industry and the overall market in terms of factor-investing styles and momentum-driven behaviour of market participants. However, significant disparities in performance metrics are observed between the respective ETFs.