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I don't think so. Assuming no entries or exits into a cap weighted index, there will be no trades. No trades mean no price pressure either way. So it would jus

I don't think so. Assuming no entries or exits into a cap weighted index, there will be no trades. No trades mean no price pressure either way. So it would just be the active traders exerting price pressure. And index buyers and sellers would buy and sell everything which wouldn't misvalue any one stock. I mean if everyone piled into the market, you would still get a bubble sure, but that would imply that at least some stocks were misvalued anyway, so we still aren't worse off. 'Intrinsic' value starts getting tricky very quickly. How do you go about defining it. You're implying it isn't the stock price, so assets minus liabilities? But then what about Uber, or Tesla. What arbitrage opportunities are you making reference to? ETFs are basically valued via arbitrage, certain traders are allowed to swap the ETF for the basket of shares, or visa versa, so if the price moves away from the underlying shares, they arbitrage it away.

thtthings 7y ago
I am referring to etf price during extreme volatility. The price can diverge a lot from its NAV. If the market is crashing then the bid ask spread is going to be very wide but i guess same will be true for common stocks. I think it is important to invest in high volume etf's like qqq/spy. So yeah you are right, arbitrage opportunities are still there i just think that during downtrends there will be more but in that case who cares about arbitrage! The best strategy is to go short.
- asdfasgasdgasdg 7y ago
  > The price can diverge a lot from its NAV. Has this ever been observed to be the case? We have had moments of extreme or at least high volatility in the recent past and I don't recall any news articles about how VTI diverged from VTSAX. That being said, even if such a thing did happen, that would only affect people who trade the ETF during those moments of volatility, right? For anyone else, the only risk is that people would be so scared off of the ETF that there would be insufficient liquidity to restore the price to the right point. Even then, an authorized participant will eventually buy up the under-priced shares and redeem them.
thtthings 7y ago
I was talking about Value investing. Do you see value in buying uber and tesla at the moment? The best value is the obvious one. Do not buy these stocks or go short at least till they are more attractively priced and there story changes. The risk/reward does not look attractive in these stocks but people still keeping buying them!
- benj111 7y ago
  Ok. I don't think a value investor would see generally more or less opportunities than now. If the index/market is over bought then there will be less opportunities, and in a selloff, more opportunities. It's worth pointing out that vanguard at least do a Value tracker. I suppose theres discussion to be had over whether it's 'passive' but I guess it's included in these figures. Short selling tends to be a losers game, stocks go up more than they go down, so I wouldn't recommend that, but yes they aren't value stocks. but then my moneys in index funds, so what do I know.

thtthings 7y ago

I am referring to etf price during extreme volatility. The price can diverge a lot from its NAV. If the market is crashing then the bid ask spread is going to be very wide but i guess same will be true for common stocks. I think it is important to invest in high volume etf's like qqq/spy. So yeah you are right, arbitrage opportunities are still there i just think that during downtrends there will be more but in that case who cares about arbitrage! The best strategy is to go short.

asdfasgasdgasdg 7y ago
> The price can diverge a lot from its NAV. Has this ever been observed to be the case? We have had moments of extreme or at least high volatility in the recent past and I don't recall any news articles about how VTI diverged from VTSAX. That being said, even if such a thing did happen, that would only affect people who trade the ETF during those moments of volatility, right? For anyone else, the only risk is that people would be so scared off of the ETF that there would be insufficient liquidity to restore the price to the right point. Even then, an authorized participant will eventually buy up the under-priced shares and redeem them.

thtthings 7y ago

I was talking about Value investing. Do you see value in buying uber and tesla at the moment? The best value is the obvious one. Do not buy these stocks or go short at least till they are more attractively priced and there story changes. The risk/reward does not look attractive in these stocks but people still keeping buying them!

benj111 7y ago
Ok. I don't think a value investor would see generally more or less opportunities than now. If the index/market is over bought then there will be less opportunities, and in a selloff, more opportunities. It's worth pointing out that vanguard at least do a Value tracker. I suppose theres discussion to be had over whether it's 'passive' but I guess it's included in these figures. Short selling tends to be a losers game, stocks go up more than they go down, so I wouldn't recommend that, but yes they aren't value stocks. but then my moneys in index funds, so what do I know.