Inefficiencies in the Pricing of Exchange-traded Funds

This looks good – unfortunately will not still be in NYC…

 

Inefficiencies in the Pricing of Exchange-traded Funds

 

MONDAY, April 15, 2013 (5:30 PM – 7:30 PM)
The Cornell Club of New York (Fall Creek Room)
6 West 44th Street, New York  NY 10017

 
Antti Petajisto, Ph.D. 
BlackRock Multi-Asset Strategy Group

 
The prices of exchange-traded funds can deviate significantly from their net asset values, on average fluctuating within a band of 260 basis points, in spite of the arbitrage mechanism that allows authorized participants to create and redeem shares for the underlying portfolios. The deviations are larger in funds holding international or illiquid securities where net asset values are most difficult to determine in real time. To control for stale pricing of the underlying assets, I introduce a novel approach using the cross-section of prices on a group of similar ETFs. Nevertheless, the average pricing band remains economically significant at 150 basis points, with even larger mispricings in some asset classes. Active trading strategies exploiting such inefficiencies produce substantial abnormal returns before transaction costs, providing further proof of short-term mean-reversion in ETF prices. 

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About the speaker: Antti Petajisto, Ph.D., is a Vice President in BlackRock s Multi-Asset Strategies group, where his team’s main responsibility is the development of active investment strategies for global tactical asset allocation.

Prior to joining BlackRock, Dr. Petajisto was an Assistant Professor of Finance at the Yale School of Management and a Visiting Assistant Professor of Finance at New York University Stern School of Business, where he taught MBA-level elective courses on investments and portfolio management as well as behavioral finance. Dr. Petajisto’s academic research includes topics such as active and passive portfolio management, performance evaluation of money managers, pricing inefficiencies in exchange-traded funds, and the price impact of passive indexing strategies. He also developed the Active Share measure which today is used by a number of practitioners. His research has been published and cited in academic journals and the popular press, and he has frequently presented his findings to both academic and practitioner audiences.

Dr. Petajisto has a Ph.D. in Finance from MIT Sloan School of Management and M.Sc. in Engineering Physics from the Helsinki University of Technology.

Registration Fees
SQA Members: $50 Regular or Academic; $30 Transitional; $30 Student
Non-Members: $70 IAFE, QWAFAFEW, or NYSSA Members; $90 Non-members

5:30pm Check-in & networking cocktail reception
6:00pm Speaker Presentation
7:00pm Networking reception continues
7:30pm Adjourn

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