IDEAS home Printed from https://ideas.repec.org/a/pal/assmgt/v11y2010i4d10.1057_jam.2009.23.html
   My bibliography  Save this article

Does premium impact Exchange-Traded Funds’ returns? Evidence from iShares

Author

Listed:
  • Gerasimos Georgiou Rompotis

Abstract

This article investigates whether the Exchange-Traded Funds (ETFs) trade away from their net asset value (NAV), the relationship between trading activity and the intraday volatility and premiums of ETFs, and how the divergence between the trading and NAV affects future return. Results indicate that ETFs trade, on average, at a slight daily dollar and percentage premium to their NAV amounting to $0.018 and 0.059 per cent, respectively. Mixed evidence on the relationship between volume and volatility are provided, but volume is found to be negatively affected by premium. In addition, return is found to be positively affected by the contemporaneous premium and negatively affected by the lagged premium, reflecting a violation to the efficient markets hypothesis. Finally, predictability patterns in ETFs’ returns are revealed.

Suggested Citation

  • Gerasimos Georgiou Rompotis, 2010. "Does premium impact Exchange-Traded Funds’ returns? Evidence from iShares," Journal of Asset Management, Palgrave Macmillan, vol. 11(4), pages 298-308, October.
    • Handle: RePEc:pal:assmgt:v:11:y:2010:i:4:d:10.1057_jam.2009.23
    DOI: 10.1057/jam.2009.23
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1057/jam.2009.23
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1057/jam.2009.23?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Timothy Jares & Angeline Lavin, 2004. "Japan and Hong Kong Exchange-Traded Funds (ETFs): Discounts, Returns, and Trading Strategies," Journal of Financial Services Research, Springer;Western Finance Association, vol. 25(1), pages 57-69, February.
    2. Blake, Christopher R. & Morey, Matthew R., 2000. "Morningstar Ratings and Mutual Fund Performance," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 35(3), pages 451-483, September.
    3. Edwin J. Elton, 2002. "Spiders: Where Are the Bugs?," The Journal of Business, University of Chicago Press, vol. 75(3), pages 453-472, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Peng, Kang-Lin & Wu, Chih-Hung & Lin, Pearl M.C. & Kou, IokTeng Esther, 2023. "Investor sentiment in the tourism stock market," Journal of Behavioral and Experimental Finance, Elsevier, vol. 37(C).
    2. Bertone, Stephen & Paeglis, Imants & Ravi, Rahul, 2015. "(How) has the market become more efficient?," Journal of Banking & Finance, Elsevier, vol. 54(C), pages 72-86.
    3. Tseng, Tseng-Chan & Lee, Chien-Chiang & Chen, Mei-Ping, 2015. "Volatility forecast of country ETF: The sequential information arrival hypothesis," Economic Modelling, Elsevier, vol. 47(C), pages 228-234.
    4. Damien Kunjal & Faeezah Peerbhai & Paul-Francois Muzindutsi, 2021. "The performance of South African exchange traded funds under changing market conditions," Journal of Asset Management, Palgrave Macmillan, vol. 22(5), pages 350-359, September.
    5. Narat Charupat & Peter Miu, 2013. "The Pricing Efficiency Of Leveraged Exchange-Traded Funds: Evidence From The U.S. Markets," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 36(2), pages 253-278, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Levy, Ariel & Lieberman, Offer, 2013. "Overreaction of country ETFs to US market returns: Intraday vs. daily horizons and the role of synchronized trading," Journal of Banking & Finance, Elsevier, vol. 37(5), pages 1412-1421.
    2. Gregor Dorfleitner & Anna Gerl & Johannes Gerer, 2018. "The pricing efficiency of exchange-traded commodities," Review of Managerial Science, Springer, vol. 12(1), pages 255-284, January.
    3. Gerasimos G. Rompotis, 2011. "Predictable patterns in ETFs' return and tracking error," Studies in Economics and Finance, Emerald Group Publishing Limited, vol. 28(1), pages 14-35, March.
    4. Jack W Aber & Dan Li & Luc Can, 2009. "Price volatility and tracking ability of ETFs," Journal of Asset Management, Palgrave Macmillan, vol. 10(4), pages 210-221, October.
    5. Jagjeev Dosanjh, 2017. "Exchange Initiatives and Market Efficiency: Evidence from the Australian Securities Exchange," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 1-2017, March.
    6. R. Shanmugham & Zabiulla, 2012. "Pricing Efficiency of Nifty BeES in Bullish and Bearish Markets," Global Business Review, International Management Institute, vol. 13(1), pages 109-121, February.
    7. repec:uts:finphd:34 is not listed on IDEAS
    8. Charteris, Ailie & Chau, Frankie & Gavriilidis, Konstantinos & Kallinterakis, Vasileios, 2014. "Premiums, discounts and feedback trading: Evidence from emerging markets' ETFs," International Review of Financial Analysis, Elsevier, vol. 35(C), pages 80-89.
    9. Perera, Devmali & Białkowski, Jędrzej & Bohl, Martin T., 2022. "Is the tracking error time-varying? Evidence from agricultural ETCs," Research in International Business and Finance, Elsevier, vol. 63(C).
    10. Mikica Drenovak & Branko Urošević & Ranko Jelic, 2014. "European Bond ETFs: Tracking Errors and the Sovereign Debt Crisis," European Financial Management, European Financial Management Association, vol. 20(5), pages 958-994, November.
    11. Devmali Perera & Jędrzej Białkowski & Martin T. Bohl, 2022. "Is the Tracking Error Time-Varying? Evidence from Agricultural ETCs," Working Papers in Economics 22/13, University of Canterbury, Department of Economics and Finance.
    12. David Blitz & Joop Huij & Laurens Swinkels, 2012. "The Performance of European Index Funds and Exchange†Traded Funds," European Financial Management, European Financial Management Association, vol. 18(4), pages 649-662, September.
    13. Cuthbertson, Keith & Nitzsche, Dirk & O'Sullivan, Niall, 2016. "A review of behavioural and management effects in mutual fund performance," International Review of Financial Analysis, Elsevier, vol. 44(C), pages 162-176.
    14. Gerasimos G Rompotis, 2012. "Does the law of one price apply to dually listed ETFs belonging to the same family? Evidence from iShares," Journal of Asset Management, Palgrave Macmillan, vol. 13(6), pages 401-420, December.
    15. Gregory Bauer & Clara Vega, 2004. "The Monetary Origins of Asymmetric Information in International Equity Markets," Staff Working Papers 04-47, Bank of Canada.
    16. Yuewen Xiao & Xiangkang Yin & Jing Zhao, 2020. "Jumps, News, And Subsequent Return Dynamics: An Intraday Study," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 43(3), pages 705-731, August.
    17. Stewart, Shamar L. & Massa, Olga Isengildina & Hassman, Colburn & Leon, Maximo de, 2023. "ETP tracking of U.S. agricultural and energy markets," Journal of Commodity Markets, Elsevier, vol. 31(C).
    18. Quentin C. Chu & Mustafa Mesut Kayali, 2006. "Standard & Poor’S Depositary Receipts And The Market Quality Of S&P 500 Index Futures," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 6(3).
    19. Isengildina Massa, Olga & Stewart, Shamar & Hassman, Colburn H., 2021. "RETURN DIVERGENCE IN COMMODITY ETFs: NATURE AND CAUSES," 2021 Annual Meeting, August 1-3, Austin, Texas 313896, Agricultural and Applied Economics Association.
    20. Kerstens, Kristiaan & Mounir, Amine & de Woestyne, Ignace Van, 2011. "Non-parametric frontier estimates of mutual fund performance using C- and L-moments: Some specification tests," Journal of Banking & Finance, Elsevier, vol. 35(5), pages 1190-1201, May.
    21. Valeria Martinez & Yiuman Tse & Jullavut Kittiakarasakun, 2013. "Volatility, trade size, and order imbalance in China and Japan exchange traded funds," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 37(2), pages 293-307, April.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:assmgt:v:11:y:2010:i:4:d:10.1057_jam.2009.23. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave-journals.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.