Skip to main content

Main menu

  • Home
  • Current Issue
  • Past Issues
  • Videos
  • Submit an article
  • More
    • About JPM
    • Awards
    • Editorial Board
    • Published Ahead of Print (PAP)
  • IPR Logo
  • About Us
  • Journals
  • Publish
  • Advertise
  • Videos
  • Webinars
  • More
    • Awards
    • Article Licensing
    • Academic Use
  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter

User menu

  • Sample our Content
  • Request a Demo
  • Log in

Search

  • ADVANCED SEARCH: Discover more content by journal, author or time frame
The Journal of Portfolio Management
  • IPR Logo
  • About Us
  • Journals
  • Publish
  • Advertise
  • Videos
  • Webinars
  • More
    • Awards
    • Article Licensing
    • Academic Use
  • Sample our Content
  • Request a Demo
  • Log in
The Journal of Portfolio Management

The Journal of Portfolio Management

ADVANCED SEARCH: Discover more content by journal, author or time frame

  • Home
  • Current Issue
  • Past Issues
  • Videos
  • Submit an article
  • More
    • About JPM
    • Awards
    • Editorial Board
    • Published Ahead of Print (PAP)
  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter
Article

Create or Buy: A Comparative Analysis of Liquidity and Transaction Costs for Selected U.S. ETFs

Milan Borkovec and Vitaly Serbin
The Journal of Portfolio Management Summer 2013, 39 (4) 118-131; DOI: https://doi.org/10.3905/jpm.2013.39.4.118
Milan Borkovec
is the managing director and head of financial engineering at ITG in Boston, MA.
  • Find this author on Google Scholar
  • Find this author on PubMed
  • Search for this author on this site
  • For correspondence: milan.borkovec@itg.com
Vitaly Serbin
is the director of financial engineering’s portfolio analytics research group at ITG in Boston, MA.
  • Find this author on Google Scholar
  • Find this author on PubMed
  • Search for this author on this site
  • For correspondence: vitaly.serbin@itg.com
  • Article
  • Info & Metrics
  • PDF (Subscribers Only)
Loading

Click to login and read the full article.

Don’t have access? Click here to request a demo 
Alternatively, Call a member of the team to discuss membership options
US and Overseas: +1 646-931-9045
EMEA: +44 0207 139 1600

Abstract

Examining 12 popular exchange-traded funds (ETFs), the authors find that ETFs and common stocks exhibit qualitatively different liquidity and cost characteristics. The limit order book for ETFs is deeper than that of common stocks, with similar daily share volume, price, spread, and volatility characteristics, especially at price levels immediately surrounding the prevailing mid-quote. The differences in trading mechanisms and liquidity provision between ETFs and common stocks affect transaction costs. In order to reflect these differences, an appropriate transaction cost model should be properly calibrated and parameterized. It should also consolidate the entire ETF liquidity accessible on the secondary market and through the creation/redemption procedure. The authors demonstrate that considering cost estimates for trading ETFs’ underlying constituents provides additional clarity about an ETF’s true cost. Their comparison of ETF and basket costs, in conjunction with a look at creation/redemption fees, indicates the need for monitoring relative ETF liquidity, as the optimal switching points between trading an ETF and creating/redeeming vary widely across ETFs and trading styles.

  • © 2013 Pageant Media Ltd
View Full Text

Don’t have access? Click here to request a demo

Alternatively, Call a member of the team to discuss membership options

US and Overseas: +1 646-931-9045

UK: 0207 139 1600

Log in using your username and password

Forgot your user name or password?
PreviousNext
Back to top

Explore our content to discover more relevant research

  • By topic
  • Across journals
  • From the experts
  • Monthly highlights
  • Special collections

In this issue

The Journal of Portfolio Management: 39 (4)
The Journal of Portfolio Management
Vol. 39, Issue 4
Summer 2013
  • Table of Contents
  • Index by author
Print
Download PDF
Article Alerts
Sign In to Email Alerts with your Email Address
Email Article

Thank you for your interest in spreading the word on The Journal of Portfolio Management.

NOTE: We only request your email address so that the person you are recommending the page to knows that you wanted them to see it, and that it is not junk mail. We do not capture any email address.

Enter multiple addresses on separate lines or separate them with commas.
Create or Buy: A Comparative Analysis of Liquidity and Transaction Costs for Selected U.S. ETFs
(Your Name) has sent you a message from The Journal of Portfolio Management
(Your Name) thought you would like to see the The Journal of Portfolio Management web site.
CAPTCHA
This question is for testing whether or not you are a human visitor and to prevent automated spam submissions.
Citation Tools
Create or Buy: A Comparative Analysis of Liquidity and Transaction Costs for Selected U.S. ETFs
Milan Borkovec, Vitaly Serbin
The Journal of Portfolio Management Jul 2013, 39 (4) 118-131; DOI: 10.3905/jpm.2013.39.4.118

Citation Manager Formats

  • BibTeX
  • Bookends
  • EasyBib
  • EndNote (tagged)
  • EndNote 8 (xml)
  • Medlars
  • Mendeley
  • Papers
  • RefWorks Tagged
  • Ref Manager
  • RIS
  • Zotero
Save To My Folders
Share
Create or Buy: A Comparative Analysis of Liquidity and Transaction Costs for Selected U.S. ETFs
Milan Borkovec, Vitaly Serbin
The Journal of Portfolio Management Jul 2013, 39 (4) 118-131; DOI: 10.3905/jpm.2013.39.4.118
del.icio.us logo Digg logo Reddit logo Twitter logo CiteULike logo Facebook logo Google logo LinkedIn logo Mendeley logo
Tweet Widget Facebook Like LinkedIn logo

Jump to section

  • Article
    • Abstract
    • TRANSACTION COST ESTIMATES AND DATA
    • LOB AND SCE COMPARATIVE COST ANALYSIS FOR ETFs AND COMMON STOCKS
    • CREATION/REDEMPTION AND ETF LIQUIDITY
    • CONCLUSIONS
    • ENDNOTES
    • REFERENCES
  • Info & Metrics
  • PDF

Similar Articles

Cited By...

  • An Intertemporal Study of ETF Liquidity * and Underlying Factor Transition, 2009-2014
  • Google Scholar

More in this TOC Section

  • PERSPECTIVES: Plato or Aristotle: Who Got It Right? Evidence from the Equity Markets
  • Editor’s Introduction for 2021 Special Issue on Factor Investing
  • PERSPECTIVES: Seeking Sustainability in American Public Employee Pension Systems
Show more Article
LONDON
One London Wall, London, EC2Y 5EA
United Kingdom
+44 207 139 1600
 
NEW YORK
41 Madison Avenue, New York, NY 10010
USA
+1 646 931 9045
pm-research@pageantmedia.com
 

Stay Connected

  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter

MORE FROM PMR

  • News
  • Awards
  • Investment Guides
  • Videos
  • About PMR

INFORMATION FOR

  • Academics
  • Agents
  • Authors
  • Content Usage Terms

GET INVOLVED

  • Advertise
  • Publish
  • Article Licensing
  • Contact Us
  • Subscribe Now
  • Sign In
  • Update your profile
  • Give us your feedback

© 2021 Pageant Media Ltd | All Rights Reserved | ISSN: 0095-4918 | E-ISSN: 2168-8656

  • Site Map
  • Terms & Conditions
  • Privacy Policy
  • Cookies