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Dave Nadig
3:25
Over the last little bit here, we havent seen one of those funds "break" from the broad trend
they're getting hit pretty much like everything else int he broad market.
THe bigger issue here is: can you really target factors.
3:26
Rob Arnott's work would suggest it's a bit of a mugs game, and that valuation ends up being the overriding signal.  Buying factors when they are historically cheap can work.
He has a cool tool over at research affiliates to check on that:
3:27
Im jealous of it.  It's very very well done.
ok one or two more and I have to hop off im afraid.
John Royo
3:27
I see a WSJ story today about how ETFs contribute to late-day trading volumes. I thought ETF portfolio managers mostly only buy or sell on index rebalance days. So, if there is late-day selling, wouldn't it come from mutual funds not ETFs?
Dave Nadig
3:27
I read that piece too:
Its tricky, because there's a lot of fingerpointing that goes on.
3:28
What's inescapable is that a LOT of action in the market now happens in the closing auction.
But there are a lot of reasons for why that's the case.
If you're an institutional manager who's getting measured against an index (which is priced at the close) then you generally want to minimize any slippage.  You want your portfolio trades "at the close" too.
3:29
So ETFs - just like TSLA or IBM -- get a LOT of volume either running into the close, or in the auction.
3:30
But, there's no structural connection that somehow the presence of ETFs is DRIVING the trading in say, AAPL, to happen at the close.  If, for example, an AP is planniong ond doing a creation, they are doing that based on trades that happened elsewhere.
So if, say, they did a big block trade for 100k shares of ROBO at noon, well, they hedge that by buying all the stocks in ROBO, so they can do the create at the end of the day.
but they DO NOT wait until 4PM, and just pray they get good prices.
3:31
they do the Buying of the stocks simultaneously with the selling of ROBO.  THat way they have no risk for the rest of the day.
At the end of the day, the present the stocks, they get the 100k shares of ROBO, and the wash their hands of hte whole thing.
but the hedge trades happen contemporaneously.
3:32
Great conversation here though folks.  Sorry I didn't get to every question, but we'll be back at this next week.
As always, we'll have a transcript up shortly.  Thanks for stopping by!
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