Price discovery and informational efficiency of international iShares funds

Recently international iShares exchange-traded funds (ETFs) have become popular investment vehicles for U.S. investors because they represent diversified portfolios of securities that have the best qualities of closed and open-end mutual funds. Like closed-end mutual funds, iShares ETFs can be traded throughout the day; like open-end mutual funds, they allow for the creation and redemption of securities, but have lower expense fees, and are more tax efficient. We analyze the price discovery process and information transmission of 24 international iShares funds. The international ETF trading in U.S. markets is driven by information released during each local market's trading session and not during the U.S. trading session; iShares have limited diversification benefits and reflect all fundamental information from their underlying stocks.