Abstract
In a sample of monthly ETFs from 2006 to 2022, we find evidence of return underreaction for extreme single-day low return (strong-MIN) events for ETFs as indicated by ongoing return underperformance in the subsequent month. This “MIN effect” result is consistent with: (i) ETF investors being hesitant to sell due to the disposition effect or being willing to buy due to anchoring bias and the illusion of a “cheap” market price during and following a strong-MIN event; and (ii) subsequent momentum drift driven by authorized participant arbitrage. We do not find robust evidence that strong-MAX events for ETFs are associated with predictable return performance in the subsequent month.
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