Loading...
Please wait, while we are loading the content...
Similar Documents
Excess Comovement and Limits-to-Arbitrage: Evidence from Exchange-Traded Funds
| Content Provider | Semantic Scholar |
|---|---|
| Author | Broman, Markus S. |
| Copyright Year | 2013 |
| Abstract | The prices of Exchange-Traded Funds can deviate from their Net Asset Values by the magnitude of arbitrage costs, such as transaction and holding costs. Despite the explicit “in-kind” arbitrage mechanism that exists for ETFs, I find that ETF mispricing mean-reverts only partially; moreover, mispricing increases not only with proxies for aggregate market illiquidity, but also for ETFs with high arbitrage costs, particularly during the financial crisis. As long as mispricing remains within the arbitrage costs boundaries, there is limited pressure to correct for any price discrepancies, which may leave the ETF partially exposed to a common factor. Consistent with this prediction and with recent theoretical work on the effects of commonality in trading patterns, I find strong evidence of comovement among excess ETF returns (i.e. after correcting for movements in the fundamentals, the NAV) within three investment styles – size, value-growth and ETF liquidity. |
| File Format | PDF HTM / HTML |
| Alternate Webpage(s) | https://efmaefm.org/0EFMAMEETINGS/EFMA%20ANNUAL%20MEETINGS/2013-Reading/papers/Commonality_ETF_FINAL_v11.pdf |
| Alternate Webpage(s) | http://www.efmaefm.org/0EFMAMEETINGS/EFMA%20ANNUAL%20MEETINGS/2013-Reading/papers/Commonality_ETF_FINAL_v11.pdf |
| Language | English |
| Access Restriction | Open |
| Content Type | Text |
| Resource Type | Article |
