A carregar...
Publicação
Trading on etf mispricing - exploiting market inefficiency and liquidity in volatile markets
| Nome: | Descrição: | Tamanho: | Formato: | |
|---|---|---|---|---|
| 1.29 MB | Adobe PDF |
Autores
Orientador(es)
Resumo(s)
This work project describes the strategy and results of four independently developed
investment strategies. The strategies focus on value and momentum, ETF mispricing, enhanced
momentum, and asset switching. The strategies are carried out in periods between 1998 and 2021.
Three of the four strategies focus on the U.S. market whereas one is focused on the European
market. Due to fundamental differences in their composition and execution, the strategies yield
different risk and return profiles; all but one strategy underperform equity and fixed-income
securities benchmark indexes. Subsequent portfolio optimization and allocation methods, with the
four individual strategies as assets, improve the risk-adjusted return of a combined portfolio in
excess of the benchmark indexes. However, the significance of these improved portfolio results is
limited due to inconsistent treatment of transaction costs and the small sample period.
There is extensive literature on ETF pricing inefficiencies and how they originate from
changes in the liquidity of underlying assets and the inability of market makers to exploit these
arbitrage opportunities in periods of volatility. Given the growth of ETFs in the past, this paper
builds upon existing work and replicates a strategy, evaluating whether ETF ownership contributes
to systemic risk in financial markets and creates new opportunities to capitalize on mispricing. It
finds that there are new periods of nontrivial net profitability when trading with mispriced ETFs
during periods of volatility, but no conclusive evidence for greater systemic risk.
Descrição
Palavras-chave
Etf Financial markets Volatility Market efficiency Mispricing Quantitative investment strategy