Case Study on Pattern.... Saucer

While preparing a course material, come across TAN forming the pattern.
Keep it here and will come back and see later on.....

Is Market Efficient? ^STI vs EWS

Below the charts showing the ^STI (Straits TIme Index) and EWS (iShares Singapore Index ETF) and the SGDUSD (Singapore Dollar and US Dollor conversion rate).

 

One can see that there is a little difference, but obvious, between these two ^STI and EWS.  This is mainly due to the components in EWS is Singapore Stocks and need to convert to USD when it calculates the intrinsic values of ETF (EWS).

 

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But, when plotting the Currency chart, it shows that it has a significant moved on 10 Jul 2013 but not reflected on the EWS.

 

This was due to the Significant moved of SGSUSD happened ONLY AFTER the US market was closed, therefore, the changed of currency can only be reflected on the EWS the next day. 

 

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This would also help in explain the divergence between the Foreign ETFs' price and their BBC Indicators.

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EWS and BBC indicator. Notice the Divergence.

 

^STI and BBC indicator. - No Divergence.

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Also note that there is a slight difference between the BBC Indicator in EWS and ^STI, for the portfolio managers can change slightly on the holding weightage dnd even the holding for foreign country stocks.   BUT, ETF TRACK VERY EFFICIENTLY to the US market index, such as SPY to S&P500, etc.

The conclusion is that the ETF value track very efficiently to its sum of components value.
 

Question for ponder:
For any company, there is a fix amount of shares when the company went public.  And, what about ETFs???  For example, if a sector ETF is hot, more and more public want to have own that sector ETF and less and less people willing to sell, how is the fund manager going to do?  This is a question worth your research and understanding!


 

Bless You

KH Tang