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Post-Brexit Analysis Shows Many ETFs Did Their Jobs

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Post-Brexit Analysis Shows Many ETFs Did Their Jobs

Well, the results weren't pretty, but many exchange traded behaved normally and did their jobs Friday as U.S. markets absorbed the stunning news of British voters opting to leave the European Union.

Over the course of the ETF industry's evolution, boo birds, naysayers and those afraid of change have frequently assailed ETFs, questioning the ability of these instruments to withstand elevated market stress. More often than not, ETFs hold up well during days of heightened market volatility, providing market participants with efficient access to various

That was the case again Friday when total dollar volume traded in ETFs hit $175 billion, or nearly third of all volume on U.S. exchanges, according to BlackRock Inc. (NYSE: BLK)'s iShares unit, the world's largest ETF issuer.

Related Link: Here's How The Brexit Could Impact The U.S. Housing Market

The iShares MSCI United Kingdom ETF (NYSE: EWU), the largest U.K. ETF trading in the U.S., tumbled nearly 12 percent on more than five times its three-month average daily volume. For an ETF with a three-year standard deviation of 14.6 percent, that's an unusual intra-day move, but Brexit was an unusual event.

Importantly, although EWU had a miserable day last Friday, it doesn't appear that the ETF suffered from crimped liquidity or that it failed to provide U.S. investors with an efficient avenue for transacting in U.K. stocks after markets there closed.

Data from iShares suggest Friday's action wasn't all about investors departing ETFs. For example, the iShares iBoxx $ High Yield Corporate Bond ETF (NYSE: HYG) and the iShares MSCI Germany ETF (NYSE: EWG) added $290 million and $177 million in new assets, respectively, in the final trading day of the week.

Ultra popular low volatility ETFs, such as the iShares Edge MSCI Min Vol USA ETF (NYSE: USMV), also did their jobs amid the Brexit calamity.

"USMV, the largest low volatility ETF, fell 1.77% in the day, 1.82% less than the S&P 500 Index which fell 3.59%," according to iShares.

Posted-In: Long Ideas News Bonds Broad U.S. Equity ETFs Short Ideas Specialty ETFs Eurozone Global Best of Benzinga

 

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