Not All ETFs Are Traded Equally

August 15, 2009

 

Figure 2. Average Daily ETF Trading Volume

IU_AverageDailyETFTradingVolume

Note: Daily trading volume is calculated by dividing the total dollar amount traded in a given month by the number of trading days in that month.

Source: NYSE Arca (www.arcavision.com)

 

At the top of this list are some of the most established ETFs with the most assets, which are popular with many different types of investors, especially institutional investors. These include four ETFs that account for about 50% of all ETF trading volume, on average, and are designed to track some of the most common, broad-based domestic indexes—the S&P 500 (SPDR S&P 500); the Nasdaq 100 (PowerShares QQQ); the Russell 2000 (iShares Russell 2000 Index); and the Dow Jones Industrial Average (DIAMONDS Trust, Series 1). These products are primarily used to gain “beta” exposure to broad indexes; the SPDR S&P 500 leads the way, singlehandedly accounting for roughly 35% of all ETF trading volume.

 

Included on this list are a group of nine more narrowly focused sector and subsector ETFs that track financial services, energy, gold, and real estate investment trust (REIT) indexes, which have been very volatile in recent months, as well as international and emerging markets ETFs, some of which are focused on a particular country. (See Figure 3 for a list of the ETFs in this category.) These nine ETFs on our top 20 list represent roughly 16% of ETF trading volume. These and similar ETFs offer easy access to specific areas of the investable markets, making them helpful tools for implementing various strategies.

 

Figure 3. Average Daily Turnover Rate Of The 20 Most-Traded ETFs By Dollar Volume

IU_AverageDailyTurnoverRate

Note: Average daily turnover rate is calculated by dividing the average daily dollar volume in a given month by the month-end total net assets. Data is from January 2008 through June 2009.

Sources: NYSE Arca (www.arcavision.com) and Morningstar

 

 

 

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