S&P Capital IQ also identifies a number of S&P 500 components that show liquidity risk relative to ETF trading action. For example, Berkshire Hathaway (NYSE: BRK.B) has an index weight of 1.36% and an average daily volume of 0.39%. Johnson & Johnson (NYSE: JNJ) has a 1.48% index weight and a 0.65% average daily volume. Microsoft (NasdaqGS: MSFT) has a 1.96% index weight and a 1.16% average daily volume. General Electric (NYSE: GE) has a 1.47% index weight and a 0.73% average daily volume.
The influence ETFs has on broad markets may not be all too surprising as studies have shown that ETFs affect index stock correlations. University of Zurich researchers have found that S&P ETFs and futures affect index stock correlations, both ETF and futures activity will affect non-index stock correlations and ETFs have a larger impact on correlations than futures. The researchers also revealed that correlations of index stocks are more sensitive to changes in index trading activity than non-index securities. [Increased Index ETF Usage Promotes Stock Correlation Across the Board]
For more information on ETFs, visit our ETF 101 category.
Max Chen contributed to this article.