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Question about ETF's
Tom Bards
Posted: 22 April 2018 09:30:13(UTC)
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Over the last few days simply out of interest I'v been looking at some of the so named 'smart beta' ETFs and in particular iShares World Momentum Factor.

My question relates to the difference in volatility between the USD and GBP versions.


http://www.hl.co.uk/shar...world-momentum-factor-u

http://www.hl.co.uk/shar...i-world-momentum-factor


Looking at these it appears the USD version had far less volatility compared with the GBP version. Does anyone know why the volatility is so marked between the two? I assume it has something to do with currency but hopefully someone here can shed a bit more light on it.
Tim D
Posted: 22 April 2018 10:05:20(UTC)
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What timescale are you looking at? I can see where you're coming from if you look at the one week or one day chart, but I suspect it's mainly to do with the GBP one being less frequently traded... if you look at the trades reported on those pages, there are hours with nothing happening - which will manifest as straight lines on the chart - whereas the USD one is non-stop action.

Actually, looking at the 1 year chart I see what you mean there too... especially back earlier in the year... GBP units look much more "spiky". Both charts have the top of the y-axis 25% above the bottom so it's not just some different scaling. Curious. Clicking through to "advanced charting" and displaying "candlesticks" and "volume" does seem to confirm the GBP units were very thinly traded and with a bigger spread, especially through the summer.

For a more quantitative approach: if I look at ftmarket's data, that reports identical 1-year standard deviations of 10.33% for both units. (However, given the chart discrepancies a 4-significant-figure agreement seems rather surprising, so I suspect that's just reporting stats for the "underlying" USD units or some ideal NAV or something).
Tom Bards
Posted: 22 April 2018 10:33:00(UTC)
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Tim D;61040 wrote:
What timescale are you looking at? I can see where you're coming from if you look at the one week or one day chart, but I suspect it's mainly to do with the GBP one being less frequently traded... if you look at the trades reported on those pages, there are hours with nothing happening - which will manifest as straight lines on the chart - whereas the USD one is non-stop action.

If I look at ftmarket's data, that reports identical 1-year standard deviations of 10.33% for both units.



I was only looking at the 1-year HL graphs and just noticed that the USD version was visibly smoother with less ups and down even with the exact same holdings.

You may be right about the trading frequency though, I actually didn't notice that when looking at them the first time around.

Mr Helpful
Posted: 22 April 2018 13:36:51(UTC)
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What happens when both are displayed in same currency?
Does the mismatch persist?
Is it possible to display the two alongside in same currency?
Slink
Posted: 22 April 2018 20:31:17(UTC)
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The fund base currency of both is USD but the share class of one is USD and the other is GBP. Hence as GBP appreciates or depreciates against the dollar you will see a more pronounced series of movements in the GBP share class. The choice of USD as the fund base currency is unsurprising given that 80% of holdings are in US shares.
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