(In)Eficiencias en los Fondos Cotizados en Bolsa -ETFs- latinoamericanos
| Autor | Yvonne Kreis - Johannes W. Licht - Alejandro José Useche Arévalo |
| Cargo | PhD in Finance de Johannes Gutenberg Universität Mainz, Alemania, 2010 - PhD in Finance (candidate), de Johannes Gutenberg Universität Mainz, Alemania, 2017 - Doctor of Business Administration de Swiss Management Center University, Zug, Suiza, 2012 |
| Páginas | 7-48 |
7
Cuad. admon.ser.organ. Bogotá (Colombia), 29 (53): 7-48, julio-diciembre de 2016
(In)EffIcIEncIEs In LatIn
amErIcan Etfs*
Yvonne Kreis**
Johannes W. Licht***
Alejandro J. Useche****
* doi: 10.11144/Javeriana.cao29-53.elae. Este artículo es producto de la investigación “Proyecto de in-
vestigación en Finanzas Corporativas, Línea de investigación en Finanzas”, nanciado por la Universidad
del Rosario, Colombia, en colaboración con Johannes Gutenberg Universität Mainz (Alemania) desde 15-
02-2016 hasta 15-02-2018. El artículo se recibió 01-10-2016 y se aprobó el 30-11-2016. Sugerencia de
citación: Kreis, Y., Licht, J. W., and Useche, A. (2016). (In)Efciencies in Latin American ETFs. Cuadernos
de Administración, 29 (53), 7-48. http://dx.doi.org/10.11144/Javeriana.cao29-53.elae.
** PhD in Finance de Johannes Gutenberg Universität Mainz, Alemania, 2010. Professor - Postdoctorate Fellow,
Chair of Banking, de Johannes Gutenberg Universität Mainz, Alemania.
E-mail: yvonne.kreis@uni-mainz.de
*** PhD in Finance (candidate), de Johannes Gutenberg Universität Mainz, Alemania, 2017. PhD Student, Chair
of Banking, de Johannes Gutenberg Universität Mainz, Alemania.
E-mail: lichtj@uni-mainz.de
**** Doct or of Business Administration de Swiss Management Center University, Zug, Suiza, 2012. Profesor
principal de carrera, Director de postgrados en Management, Escuela de Administración de la Universidad
del Rosario, Bogotá, Colombia.
E-mail: alejandro.useche@urosario.edu.co
8Cuad. admon.ser.organ. Bogotá (Colombia), 29 (53): 7-48, juli0-diciembre de 2016
Yvonne Kreis, Johannes W. Licht, Alejandro J. Useche
(In)Efciencies in Latin
American ETFs
abstract
This study empirically evaluates the pricing efficiency of several Latin
American Exchange Traded Funds (ETFs) regarding deviations of ETF
prices from their underlying net asset values (NAVs). A measure of these
inefficiencies is made by implementing a trading strategy and running
CAPM and Fama-French regressions to determine the excess return of
the trading. Results do not conform to the Efficient Market Hypothesis,
but rather support aspects of behavioral finance. Finally, it is addressed
how these inefficiencies influence the decision for ETF share creation
and redemption via logit regression analyses. Results highlight that
ETF authorized partners react to inefficiencies by trading within the ETF
primary market.
Keywords: Exchange-traded funds, inefficiency, price/
NAV ratio, creation & redemption, investments.
JEL Classification: G10, G14, G15
(In)Eciencias en los
Fondos Cotizados en Bolsa
–ETFs– latinoamericanos
rEsumEn
Este estudio evalúa empíricamente la eficiencia en la valoración de va-
rios ETFs latinoamericanos, expresada en desviaciones de sus precios
de mercado frente a los valores liquidativos subyacentes. Se cuantifican
tales ineficiencias y se implementa una estrategia de negociación verifi-
cada por regresiones basadas en el CAPM y el Modelo Fama-French. Los
resultados discrepan con la Hipótesis de los Mercados Eficientes y son
mejor explicados por aspectos de las finanzas comportamentales. Final-
mente, se examina cómo las desviaciones influyen sobre la decisión de
creación o redención de ETFs, mediante un análisis de regresión logística.
Los resultados evidencian que los participantes autorizados reaccionan
ante las ineficiencias realizando transacciones en el mercado primario.
Palabras clave: fondos cotizados en bolsa, ineficiencia, coeficiente
precio/valor liquidativo, creación y redención, inversiones.
Clasificación JEL: G10, G14, G15
(In)Eciências nos Fundos
de Índice –ETFs– latino-
americanos
rEsumo
Este estudo avalia empiricamente a eficiência na valoração de vários
ETFs (exchange traded funds) latino-americanos expressa em desvios
de seus preços de mercado em comparação aos valores liquidativos
subjacentes. Quantificam-se essas ineficiências e implementa-se uma
estratégia de negociação verificada por regressões baseadas no CAPM
e no Modelo Fama-French. Os resultados divergem com a hipótese
dos mercados eficientes e são mais bem explicados por aspectos das
finanças comportamentais. Finalmente, examina-se como os desvios
influenciam na decisão de criação ou retenção de ETFs, mediante uma
análise de regressão logística. Os resultados evidenciam que os partici-
pantes autorizados reagem ante as ineficiências realizando transações
no mercado primário.
Palavras-chave: fundos de índice, ineficiência, coeficiente preço-
valor liquidativo, criação e retenção, investimento.
Classificação JEL: G10, G14, G15
9
Cuad. admon.ser.organ. Bogotá (Colombia), 29 (53): 7-48, juli0-diciembre de 2016
(In)Efficiencies in Latin American ETFs
Introduction
Investment in exchange-traded funds (ETFs) have strongly increased over the past decade
(Blackrock, 2015). While this is a global development, most studies on ETFs focus on de-
veloped markets in North America or Europe. Yet, ETFs provide an opportunity to inves t
in a well-diversied portfolio of assets in emerging markets. Only in a small number of
Latin American countries, ETFs track t he respective market or index (e.g. in Colombia).
Here, an investment in ETFs allows institutional and individual investors to invest in the
economy. Since several of these Latin American economies are stable and strongly de-
veloping, the interest in these ETFs will likely increase in the future.
In this paper, we focus on Latin American ETFs and provide a detailed description of their
level of (in)efciency and share creation / redemption. We rst examine the relation
between ETF prices and the value of the underlying por tfolio, i.e. the net-asset-value
(NAV). We nd signicant deviations of the market price from its fundamental value and
consider those to represent inefciencies in the market. We explicitly analyze the devel-
opment of the respective price/NAV ratio over time and document a mean reversion in
said ratio. We then suggest a long-short trading strategy f or Latin American ETFs that
yields signicant positive excess returns. Thus, trading on deviations in the price/NAV
ratio exploits these inefciencies.
Based on the analyses of the price/NAV ratio, we turn towards the question of how t hese
deviations are addressed within the market. As ETFs are created to track an underlying
index, deviations between prices and NAVs are undesirable. We focus on how the price/
NAV ratio inuences the decisions of ETF share creation and redemption. We nd that the
probability for ETF creation (redemption) is larger when the ETF is trading at a premium
(discount), i.e. when the ETF price is above (below) the NAV. This documents a strong link
between the share creation and redemption process and ETF inefciencies.
The nance literature has analyzed deviations between market prices and fundamental
prices in ETFs (e.g. Madura and Richie, 2004; Tse and Martinez, 2007)1. Engle and Sakar
(2006) provide a comparison between domestic (U.S.) ETFs and international ETFs. In
both intraday and end-of-day analysis, they nd comparatively smaller and less persistent
price/NAV ratios in U.S. ETFs potentially indicating a higher level of efciency of the U.S.
1 For a review of the empirical literature on ETFs, we refer to Boldin and Cici (2010).
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