Does the law of one price apply to dually listed ETFs belonging to the same family? Evidence from iShares

Rompotis, Gerasimos G.

doi:10.1057/jam.2012.19

Cited by 2 publications

(3 citation statements)

References 10 publications

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“…This study follows the extensive literature that focuses on a sample of ETFs that belong solely to the family of the Barclays' iShares MSCI and are deemed dominant in the ETF market, to study the persistence of their performance (Jares & Lavin, 2004;Kuo & Mateus, 2007;Miffre, 2007;Rompotis, 2011Rompotis, , 2012Rompotis, , 2022Zawadzki, 2020). The reasons for selecting BlackRock's iShares ETF issuer are as follows.…”

Section: Data Sources and Construction Of Samplementioning

confidence: 99%

Returns behavior of ESG ETFs in the COVID‐19 market crash: Are green funds more resilient?

ElBannan

2023

J Corp Accounting Finance

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This study explores the importance of environmental, social, and governance (ESG) performance in explaining the returns and volatility of returns of exchange‐traded funds (ETFs) during the market crash induced by the COVID‐19 pandemic. The study uses an unbalanced panel of monthly data during the period 2005–2021 for a diversified sample of 160 iShares Morgan Stanley Capital International conventional and ESG/socially responsible investment (SRI) equity funds. To obtain robust results, a variety of analyses are conducted, including multiple panel regressions based on one‐way clustering, standard error estimates obtained from different covariance matrix estimators that are heteroskedasticity and autocorrelation consistent, simultaneous quantile and inter‐quantile regressions, weighted least square regressions with alternative weights for the regression coefficients, and tests of coefficient equality with bootstrapped standard error of difference in subsample regressions. All the sensitivity analyses give similar results, confirming their validity. The results provide strong evidence for the resilience of sustainable funds during the crash, with ETF returns showing persistence during the market downturn. This study suggests that ESG/SRI investments may help ETFs to outperform their counterparts, indicates that sustainability investments matter in times of crisis, and implies the adoption of strategies that promote sustainable investment development.

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Section: Data Sources and Construction Of Samplementioning

confidence: 99%

Returns behavior of ESG ETFs in the COVID‐19 market crash: Are green funds more resilient?

ElBannan

2023

J Corp Accounting Finance

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“…The Law of One Price (LOOP) says that identical securities trading in more than one market must have the same price, otherwise, intelligent investors can generate risk free profits through arbitrage (Lamont & Thaler, 2003;Rompotis, 2012;Hilliard, 2014). Arbitrage is the simultaneous purchase and sale of the related securities at two difference prices, leading to market equilibrium.…”

Section: Pricing Efficiencymentioning

confidence: 99%

“…To make arbitrage profits, authorized participants buy ETF units in secondary market and simultaneously sell the stocks of underlying portfolio (Dolvin, 2010;Ben-David et al, 2011;Hilliard, 2014). The buying pressure in secondary market and selling pressure on underlying stocks will correct the deviations and bring market equilibrium as per Law of One Price (LOOP) (Rompotis, 2012). In case the market price of ETF is at a premium to its NAV, authorized participants sell in secondary market and buy in primary market to take the advantage of price differential (Hilliard, 2014).…”

Section: Introductionmentioning

confidence: 99%

Do Exchange Traded Funds in India Have Tracking and Pricing Efficiency?

Velagala

2022

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Purpose:The study investigates tracking and pricing efficiencies of selected exchange traded funds (ETFs) in India.Design/methodology/approach: The study applies different methods of determining tracking errors to assess tracking abilities of ETF managers; the average absolute differences as well as the standard deviation of differences between ETF returns and benchmark returns and standard errors from the regression of ETF returns against the benchmark. The study further uses Vector Error Correction Model (VECM) to examine the lead lag relationship between Net Asset Values (NAVs) and market prices of ETFs and pricing efficiency. Findings: ICICI Prudential Sensex ETF exhibits the highest tracking error and Aditya Birla Sun Life Nifty ETF shows the lowest tracking error. NAVs lead their respective market prices indicating huge scope for arbitrage opportunities to authorized participants. Persistence in the deviation between NAVs and market prices is prevalent for longer period, indicating inefficient price discovery mechanism of Indian ETF market. The study confirms market inefficiency in Indian ETF market.Originality/value: The existing literature on tracking and pricing efficiencies of ETF is largely with respect to advanced countries. There is a limited evidence of such studies in Indian context. Hence, the study adds to the literature by examining the efficient market hypothesis in Indian ETF market in terms of tracking and pricing efficiencies. Practical Implications:The study reveals the presence of inefficient price discovery and the scope for arbitrage. This may be due to low level of trading activity and inefficient arbitrage mechanism in India. Hence, it is the need of the hour that Securities and Exchange Board of India (SEBI) and stock exchanges should take necessary initiatives to improve trading activity in ETFs and thereby to achieve market efficiency.

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Does the law of one price apply to dually listed ETFs belonging to the same family? Evidence from iShares

Cited by 2 publications

References 10 publications

Returns behavior of ESG ETFs in the COVID‐19 market crash: Are green funds more resilient?

Returns behavior of ESG ETFs in the COVID‐19 market crash: Are green funds more resilient?

Do Exchange Traded Funds in India Have Tracking and Pricing Efficiency?

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