My question is not about the index (which I understand will rebound), but about the ETF construct itself. There are various way of how an ETF can be constructed to copy an index and I understand they will affect how it fares, but all I've ever seen are very broad idealized discussions of it. Are there any very specific desciprtions/simulations of what a fast and big crash would have as an effect on an ETF.
I image for example that the tracking error would get much bigger than it does in fair markets, I imagine the costs would increase substantially, I image that the borrowing of stocks that most ETFs engage in would have an effect (on the replicating ones), and how about the Swap-based construct? I imagine that some percentage of companies would go bankrupt or maybe suspended from trade for some time, and this would have an effect. I am guessing that when an index goes from 100 to 10 and back to 100 in an idealized world you'd expect to be where you started with out ETF that tracks that index (+/- a fe percentage), but in the real world I imagine if you started out with a 100 bucks in that ETF you'd be more likely at a number that's well below 100 bucks when that index rebounded.
Does anyone have any sources that deal with these questions in detail?
