The impact of fundamental shocks on bond ETF premiums
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- Master of Science 
This thesis explores how fundamental shocks in form of surprising changes in the federal funds rate can impact bond exchange-traded fund (ETF) premiums. We utilize a linear model with interaction terms, and ETF fixed effects on a representative sample of U.S. bond ETFs between 2012-2022. We find that the fundamental shocks do not impact bond ETF premiums during ordinary times, as they impact the underlying bonds and the ETF equally. However, post Covid as well as on days of monetary policy announcements, surprises are negatively related to changes in premiums. It suggests that under certain circumstances fundamental shocks can impact ETF premiums due to the illiquidity of the underlying assets.
Masteroppgave(MSc) in Master of Science in Finance - Handelshøyskolen BI, 2023