Using EWJ to Access Japan: A Price Discovery Case Study
Bonds, Dividend Investing, ETF investing
Seeking Alpha Analyst Since 2011
Last week, Alphaville blogger Izabella Kaminska warned investors to “beware your Japan exposure”, stating that the iShares MSCI Japan fund (EWJ) is not a proxy for Japan (or at least, “not completely”). Kaminska noted the sizable premium to net asset value (NAV) that EWJ and other U.S.-listed Japan ETFs have experienced at market close the past couple of weeks, shrugging off the explanation provided by Index Universe that due to time differences “these price discrepancies are not premiums in the traditional sense, . . . but gauges by the U.S. market of the expected value of the underlying securities once they open the following day.” Since the concept of premium/discount in international ETFs tends to cause a lot of confusion, I hope I can shed some light on the subject.
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