Extending ETF Price Histories with Mutual Fund and Index Returns
Summary
The article describes a way to lengthen an ETF’s historical price series when the fund has a short trading record. It maps ETFs to earlier mutual-fund or index return series, calculates cumulative returns, and finds the overlap date when the ETF first has a traded price. A scaling factor based on the ETF close and the index’s cumulative return at that date puts the earlier proxy series onto the ETF’s price scale. The historic segment is then appended to the observed ETF prices.
Examples span US and international equities, Treasury securities, emerging-market bonds, and gold. The method treats the proxy as a substitute for ETF prices before the ETF existed, so it creates a continuous research series rather than actual ETF trading history. Proxy selection and fee treatment matter: the article identifies the emerging-market bond extension as especially tenuous and describes adjusting some index returns for expected expenses. The resulting series should be interpreted with those assumptions in mind, particularly in long-horizon backtests.
Key ideas
- Map each ETF to an earlier mutual fund or index return series that approximates its exposure.
- Scale the proxy’s cumulative returns at the ETF’s first available date to align price levels.
- Append the scaled proxy history before the ETF’s observed price history.
- The extended values are synthetic history and do not represent ETF prices before launch.
- Proxy quality and expense adjustments vary by asset class and can materially affect backtests.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.