Abstract
In this paper we study the intraday price formation process of country Exchange Traded Funds (ETFs). We identify specific parts of the US trading day during which Net Asset Values (NAVs), currency rates, premiums and discounts, and the S&P 500 index have special effects on ETF prices, and characterize a special intraday and overnight updating structure between these variables and country ETF prices. Our findings suggest a structural difference between synchronized and non-synchronized trading hours. While during synchronized trading hours ETF prices are mostly driven by their NAV returns, during non-synchronized trading hours the S&P 500 index has a dominant effect. This effect also exceeds the one that the S&P 500 index has on the underlying foreign indices and suggests an overreaction to US market returns when foreign markets are closed.
Original language | English |
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Pages (from-to) | 1412-1421 |
Number of pages | 10 |
Journal | Journal of Banking and Finance |
Volume | 37 |
Issue number | 5 |
Early online date | 30 Apr 2012 |
DOIs | |
State | Published - May 2013 |
Externally published | Yes |
Bibliographical note
Funding Information:We would like to thank the staff at Blau Capital LTD. for their assistance throughout our work, especially Shai Blau for useful discussions and comments and Itai Blau for assistance with the data. We would also like to thank participants of the finance seminar at the Hebrew University and of the IFABS 2011 conference in Rome for helpful comments. This research was supported by a grant from The Israel Foundations Trustees (2011–2013), and by the Jewish Communities of Germany Research Fund.
Funding
We would like to thank the staff at Blau Capital LTD. for their assistance throughout our work, especially Shai Blau for useful discussions and comments and Itai Blau for assistance with the data. We would also like to thank participants of the finance seminar at the Hebrew University and of the IFABS 2011 conference in Rome for helpful comments. This research was supported by a grant from The Israel Foundations Trustees (2011–2013), and by the Jewish Communities of Germany Research Fund.
Funders | Funder number |
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Israel Foundations Trustees |
Keywords
- Arbitrage
- ETF
- Hedging
- Overreaction
- Structured products
- Synchronized trading