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Working Paper-Liquidity Improvement, Exchange-Traded Funds Flows and Mispricing
December 1, 2013--Abstract:
Exchange traded funds (ETFs) provide an ideal platform to examine the impact of liquidity improvement-the difference between the liquidity of an ETF and that of its underlying portfolio -on fund flows and pricing efficiency. This is because both the ETF and its underlying portfolio are traded, and the open-end structure of the ETF via the share creation and redemption process adds a second layer of liquidity.
We document that liquidity improvement in spreads and in turnover are positive for the average fund, but in price impact it is negative. There is also considerable cross-sectional variations. Our main finding is that liquidity improvement strongly predicts ETF net inflows. Further, we find that while improvement in spreads is equally significant for both institutional and retail investors, improvement in price impact and in turnover matter much more for institutional investors. Finally, we show that mispricing is significantly smaller for funds with high ETF liquidity and underlying portfolio liquidity.
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Authors: Markus S. Broman-York University-Schulich School of Business
Pauline M. Shum
-New York University- Schulich School of Business
Source: http://papers.ssrn.com
Build America Bonds' Scarcity Vexes ETFs
Liquidity could become an issue down the road. Here's how to handle the problem.
November 30, 2013--Remember Build America Bonds? Interest-rate worries have put this roughly $180 billion corner of the taxable muni market on track for its first-ever annual loss.
Created as part of President Obama's 2009 stimulus plan, BABs are generally high-quality infrastructure bonds with above-average yields, so the drop will strike some as a chance for bargain-hunting.
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Source: Barron's
S&P Dow Jones Indices' Market Attributes-Index Dashboard -Latin America
November 29, 2013--This month's highlights include:
Latin American equities continued their year-to-date losses in November. The S&P MILA 40 and S&P Latin America 40 declined 7% and 4%, respectively. Mexico was the only BMI country to post a gain (3%). Peru was the worst performer this month as well as so far this year, down 30%.
The U.S. equity market continued to chug along in November. The Dow Jones Industrial Average and S&P 500 added another 4% and 3%, respectively. Both indices hit new highs during the month and, more significantly, broke through new thresholds (16,000 for DJIA and 1800 for S&P 500). Developed markets were flat, up less than 1%, but emerging markets had a less rosy month, declining 2%.
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Source: S&P Dow Jones Indices
S&P Dow Jones Indices' Market Attributes-Index Dashboard Canada
November 29, 2013--This month's highlights include:
November was a tepid month for Canadian equities. The S&P/TSX Composite and S&P/TSX 60 both climbed less than 1%, following a 5% jump last month.
The U.S. equity market continued to chug along in November. The Dow Jones Industrial Average and S&P 500 added another 4% and 3%, respectively. Both indices hit new highs during the month and, more significantly, broke through new thresholds (16,000 for DJIA and 1800 for S&P 500).
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Source: S&P Dow Jones Indices
Horizons ETFs Announces Closure of Certain ETFs
November 29, 2013--Horizons ETFs Management ( Canada ) Inc. ("Horizons ETFs" or the "Manager") announced today that it will be terminating certain exchange traded funds ("ETFs") effective at the close of business on Friday, January 31, 2014 (the "Termination Date"). The ETFs being terminated (collectively, the "Terminated ETFs") are as follows:
Horizons BetaPro COMEX(R) Copper Bull Plus ETF Ticker: HKU
Horizons BetaPro COMEX(R) Copper Bear Plus ETF Ticker: HKD
Horizons Australian Dollar Currency ETF Ticker: ASD
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Source: Horizons ETFs Management (Canada) Inc
UBS launches first sterling-hedged MSCI ETFs for Canada and Europe
November 28, 2013--The first sterling-hedged MSCI ETFs for the Eurozone, Canada and Switzerland have been launched by UBS Global Asset Management.
The three exchange-traded funds will follow the MSCI index for their relative markets and will be listed on the London Stock Exchange. UBS is also listing an MSCI Japan ETF, which it claims has the lowest total expense ratio in its class at 0.45 per cent.
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Source: Money Marketing
Stock Gains Offset Concerns About Economic Policies
November 27, 2013--Consumer confidence rebounded in late November, shaking off the last remnants of the federal
shutdown. The November increase was due to an improved outlook for the economy, with the gains primarily
among upper income households.
Increases in household income and wealth were reflected in more optimistic personal financial assessments among those in the upper third of the income distribution, whereas households in the bottom third reported declines in their incomes as well as negative changes in their net worth. The current state of consumer sentiment is consistent with an economic growth rate slightly above 2%, largely stimulated by wealth gains not improvements in jobs and wages. This amounts to continued economic stagnation, which can be defined like the Fed's definition of stable prices, at about 2%-the average GDP growth rate in the past few years.
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Source: Thomson Reuters University of Michigan
CBOE Introduces The CBOE Mid-Term Volatility Index
VXMT Measures Six-Month Volatility
Complements 30-Day VIX, Adds Another Measure to SPX Option Term Structure
November 27, 2013--Chicago Board Options Exchange, Incorporated(R) (CBOE(R)) today announced that it has created a new benchmark volatility index -the CBOE Mid-Term Volatility IndexSM (ticker: VXMTSM).
CBOE began disseminating values for the new Mid-Term Volatility Index today.
The CBOE Mid-Term Volatility Index is a measure of the expected volatility of the S&P 500(R) Index over a six-month time horizon. The VXMT index is calculated using the well-known CBOE Volatility Index(R) (VIX Index(R)) methodology, applied to S&P 500 Index (SPX) options that expire six to nine months in the future.
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Source: CBOE
UBS Global Allocation Trust proposed delisting and conversion to open ended tactical ETF fund of funds and unitholder meeting
November 27, 2013--UBS Global Asset Management (Canada) Inc., as manager of the UBS Global Allocation Trust (GAT) has announced that it is holding a special meeting of unitholders on January 8, 2014 for GAT ("the "Fund"). The unitholders will be asked to approve the proposed delisting of the GAT from the TSX and its conversion into an open ended and daily redeemable tactical ETF fund of funds subject to National Instrument 81-102.
Unitholders of GAT will also be asked to approve the necessary changes to the investment guidelines.
This change will continue to leverage UBS Global Asset Management's 30-year heritage in active asset allocation but do so using best in class ETFs in its portfolio construction which utilizes our disciplined ETF selection and monitoring process, in place since 2003.
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Source: UBS Canada
IMF Canada-2013 Article IV Consultation Concluding Statement of the Mission
November 27, 2013--This statement presents the preliminary assessment of the 2013 Article IV Consultation mission to Canada. Growth remained modest in 2013, as the expected transition from domestic demand-to export-led growth has proven elusive. The uncertain global environment weighed on exports and business investment,but competiveness challenges and infrastructure bottlenecks in the energy sector also played a role.
Stronger external demand is expected to push growth above its potential rate from 2014,but the balance of risks is tilted on the downside. While residential investment and house price growth continued to moderate in 2013,elevated levels of household debt and high valuations in a number of housing markets remain a potential vulnerability. Policies should remain focused on sustaining growth until the rotation to exports and business investment gains firmer momentum,while assuring that the gradual unwinding of domestic imbalances continues and that the fiscal position is maintained on a sustainable trajectory.
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Source: IMF
