Search results

Prior literature has shown deviations between ETF prices and their net-asset-value (NAV) to exist. Fulkerson and Jordan (2013, p. 31) question “if there exists a true tradeable strategy” to exploit these inefficiencies. The purpose of this paper is to implement a profitable daily long-short trading strategy based on price/NAV information and explicitly accounting for trading costs.

For a sample of European sector ETFs, the authors analyze gross and net returns of a long-short trading strategy in the capital asset pricing model and Fama-French three-factor model.

The authors document positive gross excess return for the long-short trading strategy in all sample periods, but net excess returns to be positive only between 2008 and 2010.

The results document a profitable long-short trading strategy exploiting deviations between ETF prices and NAV and highlight the impact of trading costs in ETF markets. Due to the limited availability of historic trading cost data, the research uses a comparatively small sample size.

The net profitability of long-short trading in ETFs is only found in times of high uncertainty in the stock market.

The inclusion of trading costs enables a detailed comparison between gross and net returns in ETF trading, addressing potential limits to arbitrage.

This study examines the behaviors of eight Asian emerging market Single Country‐Closed End Funds’ (SCCEFs) market prices, net asset values (NAV) and price to net asset value ratios from January 5, 1996 to February 25, 2000, bracketing the period of the Asian currency crisis. The purpose of the study is to discern the degree of change of SCCEFs’ market prices and net asset values (NAV) in conjunction with changes in certain objective economic factors as explanatory variables, particularly changes in exchange rates, that may shed light on the probable reasons for the stickiness of market prices and yet speedy adjustment of NAVs. Results of statistical analysis suggest asymmetric information holding explanation to be the major reason for the observed phenomenon that can be exploited for profitable SCCEF investment decisions.

This paper aims to provide a practitioner's view on the key areas broker‐dealers need to evaluate while undergoing a mutual fund remediation exercise.

This article is based on the experiences of the author while working with various broker dealers in this area.

The takeaways are categorized in four sections. These are: assessing data availability and quality; defining remediation process and selecting associated algorithms; analyzing key business rules, and creating and managing an automated rules‐based engine. Each section details issues that need to be considered and analyzed, options available and the impact of such options.

Tackling the areas identified in the article can help firms in streamlining the process, making it predictable, consistent, transparent and auditable. It also helps in reducing the recurrence of these issues and provides a clear basis for other remediation exercises like NAV Transfers, breakpoint accuracy and market timing.

While there are several publications that explain the underlying problem, there is limited literature that details the issues and road‐blocks confronting organizations that need to undertake such an initiative. The paper addresses this gap and gives compliance professionals a checklist to ensure a smooth remediation process.

The purpose of this paper is to test the hypothesis that the valuations of European real estate securities are, in part, determined by the relative liquidity in the companies’ shares.

Six groups are derived for our sample of European listed real estate companies. They are split between the UK and Europe, and then both sets are categorised by liquidity as large, medium or small. These are then tested for market depth, market tightness and difference in valuations over the cycle 2002-2012. Intuitively, it can be expected that the stock market valuation premium for companies with greater liquidity increases post the global financial crisis.

The key discriminating variable that drives companies’ liquidity and valuations is market capitalisation. For both the UK and Europe, the valuation premium of larger companies vs small companies has increased significantly since 2008 (by 20-40 per cent), which can be attributed to the increased value placed on liquidity post GFC.

The sample size is relatively small, and subject to individual company influences on stock market valuation.

The key implications from the findings are the cost and quantum of new equity capital available to companies with superior liquidity, and the possibility of exclusion from portfolios for companies with low liquidity.

Previous studies have focussed on returns for measuring a liquidity premium. This study focusses on relative valuations and how the liquidity premium changes throughout the cycle.

The purpose of this paper is to examine the shifts in investor sentiment around the last seven US presidential elections (1988 through 2012).

Investor sentiment is measured by changes in closed-end funds discounts, and the results are corroborated with three robustness tests, including an alternate measure of investor sentiment obtained from the survey conducted by the American Association of Individual Investors.

Closed­end funds discounts are significantly diminished from two weeks before a US presidential election to a week before the election, and persist until the week after the election, suggesting an increase in investors’ optimism during that period, particularly when a Democrat is elected president. More than the particular party prevailing, however, investors appear to be more interested in avoiding the entrenchment of power since the results suggest that they become optimistic when a change in the ruling party takes place, but become pessimistic when there is power continuity in the White House. The increase in investor optimism that is observed around the time of US presidential elections is not replicated during non-election years, which seems to corroborate that the elections are indeed driving the results.

This paper is the first to formally examine the relation between investor sentiment and US presidential elections using closed-end funds discounts as the measure for sentiment.

This paper aims to investigate the pricing efficiency of Saudi Sharia-compliant (i.e. Islamic) exchange-traded funds (ETFs).

The paper adheres to a positivist research philosophy with a deductive research approach where data is collected, analyzed and interpreted to examine a hypothesis. Ordinary least squares (OLS) regressions are applied to investigate pricing efficiency and persistence.

The results show that Saudi ETFs do not currently offer proper diversification for investors, possibly due to their low trading volumes and the delays of market prices in reflecting net asset value (NAV). On average, ETFs trade at a premium to their NAVs. Moreover, the authors find that the deviations of ETF prices from their NAVs (i.e. premiums or discounts) do not disappear in one day. The results reveal a significant positive relationship between the trading volume of Saudi ETFs and volatility, a significant positive correlation between ETF returns and contemporaneous deviations and a significant negative relationship between returns and lagged deviations. These findings can be interpreted as evidence against the market efficiency of Saudi ETFs.

Individual and institutional investors can use Saudi ETFs, especially as their efficiency improves with increased trading volume (liquidity). Saudi regulators must increase their efforts to educate market participants and expand the availability of information to enhance transparency and awareness of the benefits of investing in ETFs, which will positively affect liquidity and pricing efficiency in the future.

This paper is the first to perform empirical tests on Saudi ETFs. Saudi Arabia deserves further attention because it is the most significant stock market in the Gulf Cooperation Council and only recently allowed foreigners to participate.