FX Impact experiment

On October 14th I started a small experiment, just to have some data to look at, related to FX impact that people complain and discuss so much.

I invested in multiple ETFs that track the S&P 500 and NASDAQ 100 indexes, additionally, I also invested in Tesla traded on German Xetra exchange, that it’s in EUR.

All was done in my practice account.
(the data is from December 31, around 16:00 GMT)

S&P 500 - €5,000 invested in each ETF

NASDAQ 100 - €2,000 invested in each ETF

TESLA - €2,000 invested in each stock

Happy new year! :tada:


Initially I thought you had some big old balls there. I got to the practice account in the end :joy:


was just to be easy to round the values :grin:

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Oh yeah of course, I’ll do mine in real mode but with a diver in each :stuck_out_tongue_winking_eye:

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The lesson to take from this is that the currency of the underlying instrument does not matter, right?
VUSA == VUSD etc

Excepting the Tesla data which is puzzling.

Happy New Year!

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Can you write your findings please?

Let’s say that it mostly doesn’t matter since no parts had a big valorization/devalorization.

Also dividend reinvestment was not accounted since it might have some small impact on long term.


Probably liquidity issue.

Could the Tesla thing be to do with differences in after market trading, and the last traded price being picked up different on the US exchange?

Having a quick look comparing on Morningstar, both prices track, and on days they diverge, the US closing price looks a bit ‘odd’.

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To be honest this offer of Tesla and other companies on Xetra are very strange for me.

ETF prices are stange.

EUR GBP FX rate diff in this period is almost 0.
EUR USD diff is around 3.7%, so TSLA price diff is correct.

In cca same period diff in mine currency is around 8%, Huge diff is vs March, almost 16% FX loss vs USD on some stocks.

Small difference? :wink:

Regarding TSLA and TL0, I found this. It discusses why arbitrage may not keep the currency-adjusted returns perfectly aligned.


This paper evaluates investment strategies that exploit the deviations from theoretical price parity in a sample of 12 dual-listed companies (DLCs) in the period 1980–2002. We show that simple trading rules produce abnormal returns of up to almost 10% per annum adjusted for systematic risk, transaction costs, and margin requirements. However, arbitrageurs face uncertainty about the horizon at which prices will converge and deviations from parity are very volatile. As a result, DLC arbitrage is characterized by substantial idiosyncratic return volatility and a high incidence of large negative returns, which are likely to impede arbitrage.

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That would imply the euro line is hedged would it not?

I don’t think there is any currency hedging affecting the TL0 stock. It shares the identical ISIN as TSLA. Will be interesting to read the above paper for insights.

As I begin to understand, there can be fluctuating differences in appetite for Tesla stock on the two exchanges. Perfect arbitrage is not possible because you cannot in practice swap a share ownership on one exchange (where it can be bought for 500 euros, say) for a share ownership on the other exchange (where it can be sold for the USD equivalent of 502 euros).

However, the difference of nearly 10% shown in the screenshot is too big to be explained this way, I should think. There is something more to understand.

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@laguiar Note that the LSE closed early at 12:30 on New Years Eve. There were subsequent changes in the GBPUSD rate by the time of your screenshot at 16:00. So value of a share in VUSA and VUSD could be different in euro terms at 16:00, even if they had been identical at the close of LSE at 12:30. Indeed a quick calculation shows that 5075.16/5079.44 is very close to the depreciation of GBP against USD between 12.30 and 16:00.

On the ETFs the differences will be down to a few different factors.

Firstly, the xTrackers Swap ETF will outperform as being derivative based it tracks the actual index performance including dividends. The others are physical (i.e. they buy the shares) and dividends are subject to withholding tax in the US which means you don’t get quite the full index performance.

See here for more info: https://monevator.com/etfs-and-the-peculiar-effects-of-withholding-tax/

Secondly, the expense ratios (TER) for each fund.

The Invesco S&P charges 0.05%, which is cheaper than the Vanguard and iShares ones (0.07%), so you’d expect this to outperform (which it does).

You can see the charges here:https://www.justetf.com/uk/find-etf.html?assetClass=class-equity&index=S%26P%2B500%C2%AE&sortField=ter&sortOrder=asc&groupField=none&tab=overview

That said, you’d expect the Vanguard and iShares S&P500 ETFs to perform similarly.

I think the difference might be due either to when the individual funds buy/sell the underlying shares and/or the liquidity / spread between the buy and sell prices in each fund. The iShares fund is 50% bigger than the Vanguard fund which should mean increased liquidity and a lower spread between buy and sell prices.

This spread between buy and sell prices may also explain most of the differences between the different listing prices of the ETFs. T212 doesn’t show this particularly well but if you go onto a brokerage service (say Hargreaves Landsdown in the UK), you’ll see the indicative spread and the spread is often higher for non-dollar listings due to a smaller fund size (fewer shares in issue = less liquidity)

I’d assume the Nasdaq ETFs are similarly split as per above reasons.

Here is a good explainer as to why the listing currency (e.g. £s or Euros) doesn’t matter in terms of currency risk: https://monevator.com/currency-risk-fund-denomination/

For Tesla, I don’t know but as others have speculated it’s probably a liquidity/currency arbitrage issue.

Lazy plug but I’ve just started a free substack email aiming to do a deeper dive on some of the T212 ETFs: https://exchangetradedfun.substack.com/


I think we can understand differences due to reasons you have mentioned.

It is the case of VUSD and VUSA that is most interesting. These are identical in every respect: same ISIN, same physical replication and OCF. Its like quoting that price of a gram of gold in two currencies. If perfect arbitrage is possible then their prices should always be in the same ratio as the spot GBPUSD rate.

I think it’s partly due to the buy/sell spread between VUSA and VUSD.

Close prices for VUSA as above and the difference between buy price and sell price is about 0.112%.

For VUSD the difference is 0.0693%, so explains some of the gap (but not all). Maybe a timing difference on purchase too?

This is quite an interesting experiment, thanks for posting this.


My previous post can explain almost all the difference in VUSD and VUSA prices.

I think it is safe to conclude that it is a matter of convenience, not performance, that determines which an investor will prefer.

One example from practice account :slight_smile: