“The rise in ETF turnover on both an absolute and relative basis to broad equities amid the significant market volatility implies investors and traders chose ETFs over single stocks,” according to Charles Schwab.
What Flow Data Reveals About ETFs
Flow data also revealed that 12 of the top 25 ETFs had net outflows of $27 billion between February 2 through February 8, with most of the money yanked out of U.S. large-cap equity. Nevertheless, 12 ETFs attracted $2.3 billion in net inflows over the same period, with some international developed equities revealing inflows.
“In this scenario of large inflows and outflows, we saw that ETFs successfully expanded or contracted with investor demand, without material dislocation between market price and net asset value,” according to Charles Schwab.
Lastly, ETF bid-ask spreads widen marginally but almost always less than the bid-ask increase in the ETFs’ underlying assets.
“ETFs were still more cost efficient than trading the underlying asset class directly. ETFs allowed buyers and sellers to meet and reposition market exposures, thus serving as an effective risk transfer mechanism for the market overall,” according to Charles Schwab.
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