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For example:

Because the NASDAQ: DAX is tracking the index INDEXDB: DAX should its trading value be completely flat when the market the markets are open in the US, but closed in Germany? I'm not seeing that artifact in any of the charts I can find.

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ETF stands for an Exchange Traded Fund. That means its value can fluctuate whenever trading can occur. Many of them are tied to various indices, but because they are ETFs, the value of that specific fund could be greater or lesser than the index they are tied to. In fact, an ETF does not even have to remain in sync with the net values of the assets the ETF itself holds. E.g. an ETF can trade at $50/share even if each ETF share is equal to holding 3 shares of companies each trading at $10.

I suspect that you are thinking of a mutual fund which is required to be traded at its component's net asset value (NAV). In the example above, a mutual fund has to be traded at $30/share because its 3 constituent holdings sum up to $30. This is also why mutual funds are only exchanged once per day at the end of the trading day, so that its most accurate NAV calculation can be completed. Because ETFs don't have to be traded at NAV, their price can go up and down as the market dictates.

  • Tracking error is not really the point. If it fails to track a stale "NAV", that is a good thing and reflects market efficiency. A perfect ETF will not stay flat just because some other market is closed. As long as it is being traded, its price will fluctuate with all available relevant information on asset values, including global economic news. – nanoman Nov 30 '18 at 0:37
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There is a very similar recent question here. The key point is that the DAX ETF is trading in the US. No savvy participant will trade based on a stale quote (the DAX closing price in Germany). They will trade based on everything they know to inform a bet on where the DAX will trade in Germany tomorrow.

In practice, the ETF traders will key off (and arbitrage with) the large and established DAX index futures market. If there were no futures market, the ETF would become the next best thing, the place where traders collectively estimate the effect of new information on the expected DAX value, while the German markets are closed.

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