An ETF, or exchange-traded fund, is a type of investment vehicle that holds a basket of assets, such as stocks or bonds, and can be bought and sold on an exchange just like a stock (see the Introduction to Derivatives lesson). What are important factors that affect an ETF price? The price of an ETF is determined by supply and demand in the market, just like any other security. Before we dive into examples, it’s important to understand which forces are driving the price changes of an ETF. Pricing an ETF requires understanding the underlying assets, market conditions expense ratio and the investor sentiment.
