COMMENTARY: Retrospective: “Toward Greater Transparency and Efficiency in Trading Fixed-Income ETF Portfolios”

Abstract

In our original JOT paper, we described a logical approach to developing and implementing an intraday intrinsic value estimate. The approach is “bottoms up” or bond-by-bond, based on adjustments to previous quotes or trade prices for subsequent movements in the individual bond’s yield curve plus an adjustment for changes in the credit spread. Adding in accrued interest and the fund’s cash, we can then derive a portfolio level estimate of the fund’s value. In this retrospective piece, we (1) provide some new evidence about the applications of our approach; and (2) further examine the possibility that the industry coalesce around improving iNAV to reach an industry standard calculation for ETF Intrinsic Value that adjusts for staleness, as proposed in our Journal of Trading article.

TOPICS: Exchange-traded funds and applications, statistical methods, mutual fund performance