ETF Price-NAV Gaps Exploitable?
Posted in Fundamental Valuation
October 15, 2012
Does market-driven deviation of the price of an exchange-traded fund (ETF) from its net asset value (NAV) predict an exploitable future return? In the September 2012 draft of their paper entitled “Reading Tomorrow’s Newspaper: Predictability in ETF Returns”, Jon Fulkerson and Bradford Jordan examine the relationship between price-to-NAV ratio and next-day return for ETFs. Using daily opening and closing prices for 762 equity ETFs and their components as available during January 2000 through early February 2011 equity, with the extreme 1% of recorded price-to-NAV values trimmed to exclude data entry errors, they find that: (more…)