PT - JOURNAL ARTICLE AU - Kevin. McNally TI - The Truths About ETF Liquidity and Pricing DP - 2001 Sep 21 TA - ETFs and Indexing PG - 98--100 VI - 2001 IP - 1 4099 - http://guides.pm-research.com/content/2001/1/98.short 4100 - http://guides.pm-research.com/content/2001/1/98.full AB - Investors often use traditional measures to gauge liquidity and mispricing risk in exchange-traded funds. However, since the specialist or market maker can create new shares or redeem old shares of an ETF on a daily basis, historical measures can be deceiving. In essence, an ETF's liquidity is equal to the liquidity of the underlying basket of stocks. A recent study attempts to prove this theory and shows that liquidity is much higher than many believe and that mispricing risk is minimal.