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n Investment Analysts Journal - The price efficiency of South African exchange traded funds

Volume 2013, Issue 78
  • ISSN : 1029-3523
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Abstract

Exchange-traded funds (ETFs) trade at a market-determined price which may differ from their Net Asset Value (NAV). This study examines the price deviations of four domestic and three foreign South African-listed ETFs. Five of these funds were found to trade at a premium to their NAV on average and two at a discount. These differences however do not persist for more than two trading days and thus the opportunity for arbitrage opportunities for investors is limited. However, the deviations do contain important information about the following day's returns on ETFs, in contravention of weak-form market efficiency. A trading strategy is developed in order to profit from this information and this is found to be successful for three of the funds after accounting for transaction costs.

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/content/invest/2013/78/EJC144049
2013-11-01
2016-12-10

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