ANALYSIS OF THE PERFORMANCE OF THE DIAMONDS ETF AROUND A GLITCH IN THE COMPUTATION OF THE DOW JONES INDUSTRIAL AVERAGE INDEX
Stoyu I. Ivanov
San Jose State University, USA
In this paper I examine the pricing deviation, pricing premium and discount, and tracking error of the Diamonds around the event of a glitch in the computation of the Dow Jones Industrial Average on February 27, 2007. That day a technical error in the computation of the Dow Jones Industrial Average caused a shock in the financial markets. This event provides for an excellent laboratory to examine the behavior of an ETF in extreme market conditions. I find that the pricing deviation and tracking error of this ETF increase and experience high volatility for a brief period of time after identifying the problem.
Key words: ETF, Pricing Deviation, Tracking Error, Technical Glitch