Simple NAV Arbitrage within Country ETFs
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Strategy in a nutshell
The strategy trades international ETFs, forecasting the UK iShare ETF NAV at the US market close. If the ETF trades more than 50bp away from this forecast, the investor goes long or short the ETF while hedging with SPY, holding positions for one day to capture pricing inefficiencies.
Economic rationale
iShare ETF prices may overreact to late-day US market news. These overreactions cause predictable next-day price adjustments, allowing the strategy to exploit systematic deviations between ETF prices and their forecasted NAVs.
Backtest performance
Annualised return33.88%