| Salomon Releases ETF Premium/Discount Study
By John Spence
October 23, 2000 |
|
Last Wednesday, 10/18/2000, the Salomon Smith Barney
Closed-End Funds Research Group released a supplement to its larger
quarterly report, "Fundamentals for Exchange-Traded Funds."
As part of the supplement, Salomon analysts conducted a premium/discount
study with exchange-traded funds
(ETFs) to back up their claim that investors should not look at
traditional liquidity measures when it comes to ETFs.
The main characteristic of ETFs that limits premiums
and discounts is their creation/redemption feature. A specialist
can create or redeem ETFs daily through "creation units"
- he or she can create new shares to meet demand or terminate
shares to quell supply on a daily basis. If the market maker is
not keeping the price reasonably close to the underlying net asset
value (NAV), institutions can arbitrage any inefficiencies.
As Lee
Kranefuss of Barclays Global Investors recently pointed out,
comparing last trade and closing NAVs for ETFs can be misleading
because many ETFs trade infrequently. In some cases, the last
trade could have been hours or even days before the the NAV was
calculated.
To test how well the creation/redemption process
works, Salomon analysts took random "snapshots"
of U.S. ETFs for the month of September (no international ETFs
were included in the study). They compared the bid price, ask
price, and midpoint between bid/ask to the intra-day value. Intra-day
value is an estimated NAV calculated for ETFs every 15 seconds
and is available from several quote services.
In general, the study concluded that the creation/redemption
process is working, and that in 91% of the sample, ETF intra-day
values were in between the bid and ask.
Premium/Discount Study Overview
| |
vs. Bid |
Intra-day value vs. midpoint |
vs. Ask |
| Average |
-0.167% |
0.014% |
0.196% |
| Cap-weighted average |
-0.039% |
0.028% |
0.094% |
| Maximum |
0.246% |
0.667% |
1.108% |
| Minimum |
-1.481% |
-1.167% |
-0.853% |
Source: Salomon Smith Barney, Reuters
From the above table, it can be deduced that the
average ETF had a bid price which was at a 0.167% discount to
actual intra-day net asset value. The cap-weighted average was
a 0.039% discount (On occasion, however, ETFs experience real-time
discounts of over 1% to their NAV, and premiums of over 0.5%).
Liquidity Measures in ETFs
| Average bid |
83,795 shares |
| Average ask |
87,438 shares |
| Average spread |
$0.21 |
| Average spread % |
0.36% |
| Cap-weighted avg. spread |
$0.13 |
| Cap-weighted avg. spread % |
0.13% |
Source: Salomon Smith Barney, Reuters
The above table shows the average bid/ask spread
and sizes found for all of the ETF "snapshots" in the
study. The above data is available for every fund in the study
in an appendix to the Salomon study.
Salomon analysts also said that they expect the
launch of more ETFs in the coming months, and that actively-managed
ETFs may be on the horizon.
For a table with ticker
symbols for intra-day NAV, closing NAV, and shares outstanding
for ETFs, click here.
Note: This spreadsheet
will be revised with a complete listing soon in ETFZone.
| Name |
TICKER |
Ticker
- Intraday NAV |
Ticker
- Closing NAV |
Ticker-Shares
Outstanding |
| Diamond
Series Trust I |
DIA |
DXV |
n/a |
n/a |
| HOLDR
B2B Internet |
BHH |
BUX |
n/a |
n/a |
| HOLDR
Biotech |
BBH |
IBH |
n/a |
n/a |
| HOLDR
Broadband |
BDH |
XDH |
n/a |
n/a |
| HOLDR
Internet |
HHH |
HHI |
n/a |
n/a |
| HOLDR
Internet Arch |
IAH |
XAH |
n/a |
n/a |
| HOLDR
Internet Infra |
IIH |
YIH |
n/a |
n/a |
| HOLDR
Market2000 |
MKH |
n/a |
n/a |
n/a |
| HOLDR
Pharm |
PPH |
IPH |
n/a |
n/a |
| HOLDR
Reg Bank |
RKH |
XRH |
n/a |
n/a |
| HOLDR
Semiconductor |
SMH |
XSH |
n/a |
n/a |
| HOLDR
Software |
SWH |
n/a |
n/a |
n/a |
| HOLDR
TeleBras |
TBH |
n/a |
n/a |
n/a |
| HOLDR
Telecom |
TTH |
IYH |
n/a |
n/a |
| HOLDR
Utilities |
UTH |
XUH |
n/a |
n/a |
| iShares
Dow Jones US Basic Mtrls |
IYM |
NLB |
NZO |
OCF |
| iShares
Dow Jones US Chemicals |
IYD |
NNE |
NZU |
OCK |
| iShares
Dow Jones US Cons Cyclical |
IYC |
NLL |
NZV |
ODF |
| iShares
Dow Jones US Cons Non-Cycl |
IYK |
NMJ |
NGJ |
OFD |
| iShares
Dow Jones US Energy Sector |
IYE |
NHH |
NLE |
n/a |
| iShares
Dow Jones US Financial Sct |
IYF |
NLF |
NSF |
OPM |
| iShares
Dow Jones US Financial Srv |
IYG |
NAG |
NIH |
OFK |
| iShares
Dow Jones US Healthcare |
IYH |
NHG |
NIT |
OFS |
| iShares
Dow Jones US Industrial |
IYJ |
NIJ |
NIW |
OFV |
| iShares
Dow Jones US Internet |
IYV |
NNU |
n/a |
OAH |
| iShares
Dow Jones US Real Estate |
IYR |
NLR |
NIZ |
OFW |
| iShares
Dow Jones US Technology |
IYW |
NJW |
NAK |
OCB |
| iShares
Dow Jones US Telecom |
IYZ |
NJZ |
NEX |
OSS |
| iShares
Dow Jones US Total Mkt |
IYY |
NLA |
NTO |
OFY |
| iShares
Dow Jones US Utilities |
IDU |
NLU |
NNO |
OGW |
| iShares
MSCI Australia Index |
EWA |
WBJ |
n/a |
n/a |
| iShares
MSCI Austria Index |
EWO |
INY |
n/a |
n/a |
| iShares
MSCI Belgium Index |
EWK |
INK |
n/a |
n/a |
| iShares
MSCI Brazil Index |
EWZ |
WWC |
n/a |
n/a |
| iShares
MSCI Canada Index |
EWC |
WPB |
n/a |
n/a |
| iShares
MSCI EMU Index |
EZU |
WWE |
n/a |
SJE |
| iShares
MSCI France Index |
EWQ |
WBF |
n/a |
n/a |
| iShares
MSCI Germany Index |
EWG |
WDG |
n/a |
n/a |
| iShares
MSCI Hong Kong Index |
EWH |
INH |
n/a |
n/a |
| iShares
MSCI Italy Index |
EWI |
INE |
n/a |
n/a |
| iShares
MSCI Japan Index |
EWJ |
INJ |
n/a |
n/a |
| iShares
MSCI Malaysia Index |
EWM |
INM |
n/a |
n/a |
| iShares
MSCI Mexico Index |
EWW |
INW |
n/a |
n/a |
| iShares
MSCI Netherlands Index |
EWN |
INN |
n/a |
n/a |
| iShares
MSCI Singapore Index |
EWS |
INR |
n/a |
n/a |
| iShares
MSCI South Korea Index |
EWY |
WWK |
n/a |
SXK |
| iShares
MSCI Spain Index |
EWP |
INP |
n/a |
n/a |
| iShares
MSCI Sweden Index |
EWD |
WBQ |
n/a |
n/a |
| iShares
MSCI Switzerland Index |
EWL |
INL |
n/a |
n/a |
| iShares
MSCI Taiwan Index |
EWT |
WWM |
n/a |
n/a |
| iShares
MSCI UK Index |
EWU |
INU |
n/a |
|
| iShares
Russell 1000 |
IWB |
NJB |
NRJ |
OWX |
| iShares
Russell 1000 Growth |
IWF |
NBF |
NAH |
n/a |
| iShares
Russell 1000 Value |
IWD |
NJU |
NDD |
n/a |
| iShares
Russell 2000 |
IWM |
NJM |
NED |
OAL |
| iShares
Russell 2000 Growth |
IWO |
NLO |
n/a |
n/a |
| iShares
Russell 2000 Value |
IWN |
NAJ |
n/a |
n/a |
| iShares
Russell 3000 |
IWV |
NMV |
NSA |
OPE |
| iShares
Russell 3000 Growth |
IWZ |
NBE |
n/a |
n/a |
| iShares
Russell 3000 Value |
IWW |
NNW |
n/a |
n/a |
| iShares
S&P 500 |
IVV |
NNV |
NES |
OWF |
| iShares
S&P 500/Barra Growth |
IVW |
NJG |
NAX |
OMR |
| iShares
S&P 500/Barra Value |
IVE |
NME |
NEA |
ONL |
| iShares
S&P Europe 350 |
IEV |
NLG |
|
|
| iShares
S&P Midcap 400 |
IJH |
NJH |
NEH |
ORJ |
| iShares
S&P Midcap 400 Growth |
IJK |
NNK |
n/a |
n/a |
| iShares
S&P Midcap 400 Value |
IJJ |
NJJ |
n/a |
n/a |
| iShares
S&P SmallCap 600 |
IJR |
NIR |
NEN |
OVD |
| iShares
S&P SmallCap 600/Barra Growth |
IJT |
NLT |
n/a |
n/a |
| iShares
S&P SmallCap 600/Barra Value |
IJS |
NJS |
n/a |
n/a |
| iShares
S&P TSE 60 Index Fund |
IKC |
NLJ |
NZM |
OCD |
| Nasdaq
100 Trust Series I |
QQQ |
QXV |
n/a |
n/a |
| SPDR
500 |
SPY |
SXV |
n/a |
SXS |
| SPDR
Basic Industries |
XLB |
BXV |
n/a |
n/a |
| SPDR
Consumer Services |
XLV |
NXV |
n/a |
n/a |
| SPDR
Consumer Staples |
XLP |
PXV |
n/a |
n/a |
| SPDR
Cyclical/Transportation |
XLY |
YXV |
n/a |
n/a |
| SPDR
Energy |
XLE |
EXV |
n/a |
n/a |
| SPDR
Financial |
XLF |
FXV |
FZN |
FXS |
| SPDR
Industrial |
XLI |
TXV |
IZN |
IZS |
| SPDR
Mid Cap (S&P 400) |
MDY |
MXV |
MXN |
MZS |
| SPDR
Technology |
XLK |
KXV |
KXN |
KXS |
| SPDR
Utilities |
XLU |
UXV |
UXN |
UXS |
| streetTRACKS
Dow Jones Global Titans |
DGT |
UGT |
UGT.NV |
UGT.SO |
| streetTRACKS
Dow Jones U.S. Large Cap Growth |
ELG |
FLG |
FLG.NV |
FLG.SO |
| streetTRACKS
Dow Jones U.S. Large Cap Value |
ELV |
FLV |
FLV.NV |
FLV.SO |
| streetTRACKS
Dow Jones U.S. Small Cap Growth |
DSG |
PSG |
PSG.NV |
PSG.SO |
| streetTRACKS
Dow Jones U.S. Small Cap Value |
DSV |
PSV |
PSV.NV |
PSV.SO |
| streetTRACKS
Fortune 500 |
FFF |
FFY |
FFY.NV |
FFY.SO |
| streetTRACKS
Fortune e-50 |
FEF |
FEY |
FEY.NV |
FEY.SO |
| streetTRACKS
Morgan Stanley High Tech 35 |
MTK |
JMT |
JMT.NV |
JMT.SO |
| streetTRACKS
Morgan Stanley Internet Index |
MII |
MMI |
MMI.NV |
MMI.SO |
| streetTRACKS
Wilshire REIT |
RWR |
EWR |
EWR.NV |
EWR.SO |
