Consequently, investors can potentially use this information to improve trade execution and diminish indirect costs associated with trading at a premium.
“In some cases, putting this knowledge to use for a single transaction could have covered the entire annual expense ratio of the ETF purchased,” Morningstar said.
While this study only covered the U.S. equity market, the author suggests that the same methodology could in theory be used for international ETFs, as well as ETFs in other asset classes like commodities and fixed income.
For more information on ETFs, visit our ETF 101 category.
Max Chen contributed to this article.