%0 Journal Article %A J. Christopher Hughen %T Premiums on Exchange-Traded Funds %B Should Traders Be Concerned? %D 2001 %J ETFs and Indexing %P 70-74 %V 2001 %N 1 %X If exchange-traded fund prices diverge from net asset values, institutional investors may arbitrage the shares through an in-kind creation/redemption process sponsored by the fund company. This study analyzes the size and duration of exchange-traded fund premiums and the efficacy of arbitrage in reducing these premiums. While premiums are observed, they are rarely persistent. The fund-facilitated arbitrage process is generally successful in aligning price and value. However, even small premium fluctuations can mean the difference between a profit and loss for the short-term investors who dominate the trading of these securities. %U https://guides.pm-research.com/content/iijetfind/2001/1/70.full.pdf