2026-05-21T19:43:03Zhttps://keep.lib.asu.edu/oai/requestoai:keep.lib.asu.edu:node-1328342024-12-18T20:58:30Zoai_pmh:alloai_pmh:repo_items132834
https://hdl.handle.net/2286/R.I.52467
http://rightsstatements.org/vocab/InC/1.0/
2019-05
35 pages
eng
Henning, Thomas Louis
Zhang, Jingbo
Simonson, Mark
Wendell, Licon
School of Mathematical and Statistical Sciences
Department of Finance
Barrett, The Honors College
Text
Exchange traded funds (ETFs) in many ways are similar to more traditional closed-end mutual<br/>funds, although thee differ in a crucial way. ETFs rely on a creation and redemption feature to<br/>achieve their functionality and this mechanism is designed to minimize the deviations that occur<br/>between the ETF’s listed price and the net asset value of the ETF’s underlying assets. However<br/>while this does cause ETF deviations to be generally lower than their mutual fund counterparts,<br/>as our paper explores this process does not eliminate these deviations completely. This article<br/>builds off an earlier paper by Engle and Sarkar (2006) that investigates these properties of<br/>premiums (discounts) of ETFs from their fair market value. And looks to see if these premia<br/>have changed in the last 10 years. Our paper then diverges from the original and takes a deeper<br/>look into the standard deviations of these premia specifically.<br/>Our findings show that over 70% of an ETFs standard deviation of premia can be<br/>explained through a linear combination consisting of two variables: a categorical (Domestic[US],<br/>Developed, Emerging) and a discrete variable (time-difference from US). This paper also finds<br/>that more traditional metrics such as market cap, ETF price volatility, and even 3rd party market<br/>indicators such as the economic freedom index and investment freedom index are insignificant<br/>predictors of an ETFs standard deviation of premia. These findings differ somewhat from<br/>existing literature which indicate that these factors should have a significant impact on the<br/>predictive ability of an ETFs standard deviation of premia.
Finance
Regression
Standard-deviation
Exploring the Relation Between NAV and Price of ETFs in Financial Markets