This is a genuine question out of curiosity (no practicality involved). VOO/VTI/SPY (just to name a few) tracks the movement of S&P500. It’s been long known that the ETFs move in direct synergy with the index itself.
I noticed VOO has level 2 market data on Moomoo showing the bid & ask. So it seems on first glance that people trading the ETF affects the price of the ETF itself. Meaning, more people buying VOO than selling = price increase and vice versa, rather than based on the prices of the 500 companies. But this can’t be true, since it moves in perfect synergy (minus management costs) with the S&P500 index itself.
Does the price of VOO gets affected by:
1) All the cumulative movements of the 500 companies it tracks based on weightage? Ppl trading on the ETF has no direct effect on its price.
2) The supply & demand of the ETF itself (behaving just like any other stock). The tracked companies market cap increasing have no direct effect on its price.
3) Or because buying VOO theoretically means you’re buying all 500 companies, so both 1) and 2) are true at the same time?
Which statement above is correct? Would appreciate if someone can shed some insight!
PS: if my assumption on 3) is correct, does that mean a stock’s price can be (marginally) influenced by the demand on all the ETFs that contains it?
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