There are ETFs that follow an index. Let's say the classic S&P 500. We have two different ETFs following the same index. Let's say Vanguard and Schwab. Let's say Vanguard has much higher demand for some reason in a time range of 1 year. Will this 1 year the Vanguard ETF go up much faster than the other one even if they are following the same index?
1 Answer
No, this would create an arbitrage which an authorized participant (AP) would quickly take advantage of. Worth reading up about the creation and redemption mechanism (here is a good place to start) to understand the exact way this happens in ETFs as it's very key to how they work.
-
1Also just realized I missed this on your other ETF question so have just added it to the answer there about spreads and charges for simplicity...– PhilipNov 14, 2017 at 14:08