PT  - JOURNAL ARTICLE
AU  - James J. Angel
AU  - Todd J. Broms
AU  - Gary L. Gastineau
TI  - ETF Transaction Costs Are Often Higher Than Investors Realize
AID  - 10.3905/jpm.2016.42.3.065
DP  - 2016 Apr 30
TA  - The Journal of Portfolio Management
PG  - 65--75
VI  - 42
IP  - 3
4099  - https://pm-research.com/content/42/3/65.short
4100  - https://pm-research.com/content/42/3/65.full
AB  - Exchange-traded funds (ETFs) and other exchange-traded products (ETPs) provide simple and efficient diversification and exposure to a wide range of investment asset classes. However, the apparently small bid–ask spreads for many ETFs can mask much higher transaction costs when ETF market prices deviate significantly from contemporaneous net asset values (NAVs). The deviations from NAV are often much greater than the bid–ask spreads suggest. The authors report that ETF closing prices are more than 90 basis points away from the NAV approximately 10% of the time. Investors’ market-on-close (MOC) orders are likely to be executed at prices below the NAV.TOPICS: Exchange-traded funds and applications, exchanges/markets/clearinghouses, derivatives