For a given sector such as healthcare or semiconductors investing in ETF s will be preferred to stock-picking when: the distribution of returns of companies in the sector is widely dispersed the distribution of returns is reasonably close to a normal distribution the distribution of returns is not known the distribution of returns is tightly clustered around a well-defined mean the sector shows higher-than average volatility Tracking over: arises when a fund manager does not pay adequate attention to his portfolio is a significant problem for index funds and ETF s targeting corporate bonds is a common flow in almost all cap-weighted index funds and ETFs is by high trading volumes is made worse by an increase in volatility if the euro declines by 5% a double-short ETF targeting the euro should: rise by 2.5% rise by 5% rise by 10% fall by 2.5% fall by 5% fall by 10% Effects of illiquidity in an ETF include all of the following EXCEPT: narrower spreads lower