 Pricing efficiency of exchange traded funds tracking the Gulf Cooperation CountriesFahad Almudhaf Afro-Asian Journal of Finance and Accounting, 2019, vol. 9, issue 2, 117-140 Abstract: This paper analyses the pricing efficiency of exchange traded funds (ETFs) as measured by the level and persistence of the deviation between market prices and net asset value (NAV). Studying ETFs tracking the unexplored Gulf Cooperation Countries (GCC), we find that Saudi Arabia exhibits the largest dollar premium, of $0.41, on average. On the other hand, the UAE trades at an average discount of $0.06. In addition, deviations (premiums or discounts) persist for as long as four days in Kuwait, while they disappear after one day in Saudi Arabia and Qatar. These empirical findings show that ETFs do not fully replicate the performance of their respective underlying benchmarks. Pricing inefficiencies exist in ETFs with significant tracking errors. Moreover, there is a positive and significant relationship between returns and contemporaneous premiums, while returns and lagged premiums are negatively related. This casts doubt on the efficient market hypothesis. Using vector error correction model (VECM), we find evidence of significant price discovery in ETFs. Our results contribute to better understanding of ETFs tracking the performance of GCC markets. Keywords: pricing efficiency; tracking error; exchange traded funds; ETFs; Qatar stock; UAE stock; Saudi Arabia stock; iShares. (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ids:afasfa:v:9:y:2019:i:2:p:117-140 Access Statistics for this article More articles in Afro-Asian Journal of Finance and Accounting from Inderscience Enterprises Ltd |
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