Pricing Efficiency of Nifty BeES in Bullish and Bearish Markets

2012 ◽  
Vol 13 (1) ◽  
pp. 109-121 ◽  
Author(s):  
R. Shanmugham ◽  
Zabiulla
Keyword(s):  
Tracking Error ◽  
Market Price ◽  
Market Conditions ◽  
Pricing Efficiency ◽  
Significant Difference ◽  
Asset Value ◽  
Replication Strategy ◽  
Net Asset Value ◽  
Portfolio Manager ◽  
Price Divergence

This article examines the pricing efficiency of Nifty BeES in bullish and bearish market conditions using high frequency data for a period of seven years. It seeks to address three questions. First, does the portfolio manager of Nifty BeES follow its benchmark replication strategy across different market conditions? Second, whether the portfolio manager minimizes the portfolio return volatility relative to the benchmark volatility. Third, whether the magnitude of premiums/discounts varies in bullish and bearish market conditions. Our findings suggest a significant difference in alpha-generation abilities of fund manager between the two market conditions. Tracking error was found to be relatively high in bearish conditions. The average premium is higher in bearish markets characterized with highest volatility. On the other hand, the average discount is higher in bullish markets characterized with least volatility. The price divergence disappears within three days and the market price and the fund’s net asset value (NAV) get aligned due to arbitrage mechanism.

scholarly journals PENGUKURAN KINERJA REKSA DANA PADA REKSA DANA SYARIAH DAN REKSA DANA KONVENSIONAL DI INDONESIA PERIODE 2008 – 2018

2020 ◽  
Vol 6 (9) ◽  
pp. 1851
Author(s):  
Zulfiyah Azmi ◽  
Bayu Arie Fianto
Keyword(s):  
Panel Data ◽  
Mutual Funds ◽  
Stock Price ◽  
Price Index ◽  
Sharpe Ratio ◽  
Ratio Method ◽  
Significant Difference ◽  
Asset Value ◽  
Net Asset Value ◽  
The Difference

This research measured and compared the performance between Islamic mutual funds and conventional mutual funds using Sharpe Ratio, Treynor Index, Jensen Alpha, Modigliani Measure, Appraisal Ratio, and Adjusted Sharpe Ratio. This research used quantitative approach with panel data that was measured by using different test and it aimed to find out the comparation of the samples. This research used Net Asset Value (NAV), Joint Stock Price Index, BI Rate to find out return and risk that will be implemented on the measured methods. The results of the research based on T-test are that there is no significant difference of performance between Islamic mutual funds and conventional mutual funds, except the Appraisal Ratio method that shows the difference on Islamic mutual funds that has a better performance.Keywords: Sharpe Ratio, Treynor Index, Jensen Alpha, Modigliani Measure, Appraisal Ratio, Adjusted Sharpe Ratio

scholarly journals Institutional Constraints on the Rate of Derivatives in Leveraged Exchange-Traded Fund

2020 ◽  
Vol 49 (2) ◽  
pp. 217-248
Author(s):  
Dowan Kim
Keyword(s):  
Tracking Error ◽  
Institutional Constraints ◽  
Exchange Traded Funds ◽  
Tracking Errors ◽  
Data Set ◽  
Asset Value ◽  
Net Asset Value ◽  
Institutional Constraint ◽  
Exchange Traded Fund ◽  
Leveraged Etf

This study confirmed whether the rate of derivatives in leveraged exchange-traded funds (ETF) calculated by derivatives and net asset value (NAV) affect their tracking errors. This research established three findings. First, when the rate of derivatives was limited at 100%, the tracking error of the leveraged ETF targeted on 2 times of the index was affected by the rate of derivatives. Second, when the rate of derivatives was eased to 200%, the same-day tracking error of the leveraged ETF targeted on 2 times of the futures index that launched after the constraints was affected by the rate of derivatives. Third, this study analyzed the constraints of the rate of derivatives after determining whether the leveraged ETF targeted on 2 times of the index indicates whether the rate of derivatives is close to 200%. As a result, even when the rate of derivatives is slightly over the 200% limit, the tracking error was lower. Even when the constraints were slightly over the limit, the tracking error was shown to be significantly lower than the other data set. This result implies that when there is an institutional constraint on the rate of derivatives, there can be limitations to fund management of leveraged ETF targeted on 2 times of the futures index.

scholarly journals Why do Korean Holding Companies Trade at a Steeper Discount to Net Asset Value?

2017 ◽  
Vol 4 (1) ◽  
pp. 77 ◽  
Author(s):  
Won Seuk Jang
Keyword(s):  
Capital Markets ◽  
Market Price ◽  
Investment Opportunity ◽  
Holding Companies ◽  
Developed Markets ◽  
Holding Company ◽  
Asset Value ◽  
Net Asset Value ◽  
Investment Opportunities ◽  
Current Market Price

This case deals primarily with the valuation of holding companies in Korea and the significant gap between its market price and net asset value (NAV), which is the sum of the estimated values of the assets in the portfolio of the holding company minus debt. Typically in the developed markets, holding company discount (as measured by price to NAV minus one) ranges between 15 to 30 percent according the various empirical studies.In Korea, however, holding company discount could stretch up to 30 to 60 percent, and often times, 30 to 40 percent has been used as a rule of thumb among the investment community. A steep discount of current market price to NAV might be interpreted as a convincing rationale for investment opportunity, but this could be a dangerous simplification of idea unless underlying reasons are properly understood.Therefore, the purpose of this case is to understand the valuation of holding companies, especially in the context of capital markets in Korea as compared to other developed markets, and develop a proper sense of investment opportunities therein.

scholarly journals Pricing Efficiency of Exchange Traded Funds in India

2020 ◽  
Vol 11 (1) ◽  
pp. 244-268
Author(s):  
Y V Reddy ◽  
Pinkesh Dhabolkar
Keyword(s):  
Stock Exchange ◽  
Market Price ◽  
Exchange Traded Funds ◽  
Demand And Supply ◽  
Correction Model ◽  
Vector Error Correction ◽  
Market Makers ◽  
Vector Error ◽  
Pricing Efficiency ◽  
Asset Value

Exchange traded funds (ETFs) have two prices, the market price and the net asset value (NAV) price. ETFs NAV price gets determined by the net value of the constituent assets, whereas the market price of ETFs depends upon the number of units bought or sold on the stock exchange during trading hours. As per the law of one price, the NAV and market price of the ETF should be the same. However, due to demand and supply forces, the market price may divert from its NAV. This price difference may have significant repercussions to investors, as it represents a cost if they buy overvalued ETF shares or sell undervalued ETF shares. Pricing efficiency is the speed at which the market makers correct the deviations between ETFs NAV and market price. The present study attempts to investigate the pricing efficiency of Indian equity ETFs employing an autoregression model over its price deviation, and also attempts to understand the lead-lag relationship between the price and NAV using the vector error correction model (VECM).

Reconsidering Returns

2021 ◽  
Author(s):  
Samuel M Hartzmark ◽  
David H Solomon
Keyword(s):  
Mutual Funds ◽  
Price Index ◽  
Market Performance ◽  
Performance Expectations ◽  
Asset Value ◽  
Net Asset Value ◽  
Perception Of Performance ◽  
Predictable Returns

Abstract Investors’ perception of performance is biased because the relevant measure, returns, is rarely displayed. Major indices ignore dividends, thereby underreporting market performance. Newspapers are more pessimistic on ex-dividend days, consistent with mistaking the index for returns. Market betas should track returns, but track prices more than dividends, creating predictable returns. Mutual funds receive inflows for “beating the S&P 500” price index based on net asset value (also not a return). Investors extrapolate market indices, not returns, when forming annual performance expectations. Displaying returns by default would ameliorate these issues, which arise despite high attention and agreement on the appropriate measure.

Determinants of Hedge Fund Internal Controls and Fees

2010 ◽  
Vol 85 (6) ◽  
pp. 1887-1919 ◽  
Author(s):  
Gavin Cassar ◽  
Joseph Gerakos
Keyword(s):  
Hedge Funds ◽  
Agency Costs ◽  
Hedge Fund ◽  
Short Selling ◽  
Internal Controls ◽  
Fund Managers ◽  
Asset Value ◽  
Net Asset Value ◽  
Financial Misstatements ◽  
Financial Misstatement

ABSTRACT: We investigate the determinants of hedge fund internal controls and their association with the fees that funds charge investors. Hedge funds are subject to minimal regulation. Hence, hedge fund managers voluntarily implement internal controls, and managers and investors freely contract on fees. We find that internal controls are stronger in funds with higher potential agency costs. Further, internal controls are stronger in funds domiciled in jurisdictions that provide investors with limited legal redress for fraud and financial misstatements. Short selling funds, however, are more likely to protect information about their investment positions by implementing weaker internal controls. With respect to fees, we find that the percentage of positive profits that the manager receives increases in the strength of the fund’s internal controls. Finally, removing the manager from setting and reporting the fund’s official net asset value, along with reputational incentives and monitoring by leverage providers, are all associated with lower likelihoods of future regulatory investigations of fraud and/or financial misstatement.

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