Abstract
Emerging market exchange-traded funds (ETFs) are the subject of the current article. In particular, a sample of 40 iShares listed in the United States and exposed to several emerging stock markets in the Americas, Europe, Asia, and South Africa is employed to study several issues surrounding the trading behavior of emerging market ETFs. The issues examined concern the behavior of their return and volatility during trading and nontrading hours; their performance relative to market performance; the correlation of emerging ETF returns with the stock market of the United States; their tracking error and the persistence in tracking error; the pricing inefficiencies in terms of deviations between the trading prices and net asset values of ETFs; the persistence in these inefficiencies, which may or may not be arbitrageable; the reaction implications for the pricing of ETFs due to the existence of these inefficiencies; and finally, the determinants of ETFs’ trading activity. The results are comprehensive and indicative of the trading behavior of U.S. ETFs invested in emerging market indexes covering the Americas, Europe, Asia, and South Africa.
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