RT Journal Article SR Electronic T1 Predictability in Bond ETF Returns JF The Journal of Fixed Income FD Institutional Investor Journals SP 50 OP 63 DO 10.3905/jfi.2013.23.3.050 VO 23 IS 3 A1 Jon A. Fulkerson A1 Susan D. Jordan A1 Timothy B. Riley YR 2013 UL https://pm-research.com/content/23/3/50.abstract AB This article studies the persistence of bond exchange-traded fund (ETF) premiums and discounts. Following a day of high or low premiums or discounts over net asset value (NAV), ETFs tend to maintain a premium or discount for up to 30 days. Premiums and discounts also predict distinct patterns of returns after daily closing. Overnight returns are negative following a high premium, while ETFs with large discounts are followed by positive overnight returns. The large discount ETFs have substantially higher returns than high premium ETFs over the subsequent thirty days. We find that traditional liquidity measures, along with prior deviations from NAV, are significant in explaining a fund’s premiums/discounts. Finally, we examine a long–short portfolio strategy to exploit the observed deviations from NAV and find it generates an alpha of 0.96% per month or about 11.5% per year.TOPICS: Fixed income and structured finance, exchange-traded funds and applications, analysis of individual factors/risk premia