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For ETF, it seems the price is determined by ask/bid and trading price.

Can it be inefficient, that the trading price deviates from the underlying tracked index?

For example, intentionally buy and sell the ETF, in a large volume, at a pretty low price.

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An ETF can be inefficient, however, it is structured to be efficient. Every ETF has Authorized Participants (AP) who basically profit off of the difference until the difference is 0. While a large order will move the ETF slightly off of the NAV, the APs should move to correct it as it is profitable for them to do.

  • Why is it profitable for APs to correct it? Is this the basic assumption: people have the consensus that ETF should track the index, so when it deviates from the index, all people will correct it, so that APs can arbitrage? – I Wonder May 30 at 3:56
  • The APs can buy the underlying assets at the NAV price and sell them at the ETF price which is higher. – Jake Freeman May 30 at 12:25

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