Analysis of the disparity factor of the Net Asset Value (NAV) on the Exchange Trade Fund (ETF) and its market price on the Indonesia Stock Exchange (IDX)

Abstract

Efficient market hypothesis (EMH) explains that the price ofa security will always be traded at its fair price. However, this is not the case for ETFs, where mispricing can occur. This research analyzes the disparity factors that can affect mispricing of 42 ETFs on IDX using secondary data. This research uses the ordinary least squares (OLS) regression method with the research hypothesis that disparity factors including the fund age, volume, difference between high and low prices, and IHSG return influence mispricing ofETFs. The result ofthis research indicates that only three factors (without IHSG return) have significant effects on ETF mispricing with R squared about 3.13%, which is similar to that reported in previous research studies byAtanasova and Weisskopf (2020) and by Shin and Soydemir (2010). The aim of this research is to help investors, investment managers, and dealers invest in and develop ETFs in Indonesia