Title: Underlying Valuation Uncertainty, Strategic ETF Creation and Pricing Efficiency

Speaker: Jinming Xue, Assistant Professor, Southern Methodist University

Host: Xiangwei Wan, Associate Professor, Antai College of Economics and Management, Shanghai Jiao Tong University

Time: 13:30-15:00, Wednesday, March 24, 2026

Venue: Room 306, Haoran Building, Xuhui Campus, Shanghai Jiao Tong University

Brief introduction of the content: 

This paper identifies a novel mechanism through which uncertainty in corporate bond valuation shapes the creation process of corporate bond ETFs. Although multiple ETFs can accept the same bond during the “in-kind” creation process, they often value it differently. Such valuation dispersion is driven by fund pricing conventions and external pricing sources but can also reflect ETFs’ efforts to minimize tracking error. Authorized Participants (APs) exploit these differences by delivering a bond to the ETF that values it most highly. While this strategic behavior increases APs’ profits, it dilutes holdings of incumbent investors and undermines ETF pricing efficiency.

Speaker's profile:

Jinming Xue is an Assistant Professor of Finance at Southern Methodist University's Cox School of Business. Jinming received my Ph.D. in Finance from the University of Maryland, College Park in 2020. His research interests are in the areas of empirical asset pricing, market microstructure, institutional investors, financial intermediation, fixed income, option pricing.

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