Variation in Iseq Index and Iseq 20 etf

Sailor

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I was looking at prices over the last few days, and at the close of business today, the Irish SE Index is down -134.1(-1.43%), while the Iseq 20 etf is up +40(+2.15%)
I am new to this and i do not understand, why the variation is so large, given that most of the larger weighting stocks are down.
 
I do not think so as it started the day close to €18 and ended the day at exactly €19
 
Trading in the ETF will cause the variation - if all of the stocks in the index are down during the day the ISEQ index will also be down ,however if investors in the ETF buy because they feel positive about the prospects for the market going forward, the ETF will be up.
 
Trading in the ETF will cause the variation - if all of the stocks in the index are down during the day the ISEQ index will also be down ,however if investors in the ETF buy because they feel positive about the prospects for the market going forward, the ETF will be up.

I was actually surprised by this but I guess it makes sense. Its not something thats widely publicised when reading about the ETF. Articles usually say that the ETF will almost always track the index but I guess this isnt exactly the case.

Is it fair to say though that while the performance of the index and ETF itself might vary slightly day to day they are almost always equal?
 
I was actually surprised by this but I guess it makes sense. Its not something thats widely publicised when reading about the ETF. Articles usually say that the ETF will almost always track the index but I guess this isnt exactly the case.

Is it fair to say though that while the performance of the index and ETF itself might vary slightly day to day they are almost always equal?

As I understand it, because ETF shares can in principle be exchanged on demand for the equivalent amount of the underlying shares, if the ETF price falls much below the value of the component shares, arbitrageurs could and would buy ETF shares and convert them to underlying shares, thereby getting the underlying shares at a discount.

On the other hand, if the ETF price rises above the value of the underlying shares, more ETF shares can be created by the fund managers - Bank of Ireland Asset Management - simply buying more of the underlying shares below the price of the ETF and using them to issue new ETF shares.

These two mechanisms will tend automatically to keep the ETF and underlying share prices more or less equal.
 
New ETF shares are issued regularly - last tranche was 400,000 issued on 16th Feb. It is never clear to me how much the price is influenced by supply and demand for ETF, and how much is influenced by the valuations done 4 times each day
 
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