PT  - JOURNAL ARTICLE
AU  - Jon A. Fulkerson
AU  - Susan D. Jordan
AU  - Denver H. Travis
TI  - Bond ETF Arbitrage Strategies and Daily Cash Flow
AID  - 10.3905/jfi.2017.27.1.049
DP  - 2017 Jun 30
TA  - The Journal of Fixed Income
PG  - 49--65
VI  - 27
IP  - 1
4099  - https://pm-research.com/content/27/1/49.short
4100  - https://pm-research.com/content/27/1/49.full
AB  - Bond ETFs trading at a premium (discount) to NAV experience more creations (redemptions) than those trading at parity. When these transactions occur, subsequent returns partially offset the premium or discount. These results suggest that arbitrage trading between the underlying bonds and the ETFs has a significant impact on market returns. However, in the absence of cash flow, premiums and discounts persist. The authors consider market factors that discourage arbitrage trading around premiums and discounts, and find these anomalies persist in part due to costs and uncertainty in the secondary market.TOPICS: Fixed income and structured finance, exchange-traded funds and applications