Tracking Ability of Exchange-Traded Funds : Evidence from Emerging Markets Equity ETFs

• Autorzy: Tomasz Miziołek , Ewa Feder-Sempach
• Języki publikacji: EN

Abstrakty

EN

In recent years asset growth of passively managed funds, including ETFs, has been substantial all over the world. The main purpose of an ETF is to replicate both the return and risk characteristics of the underlying index. The efficiency of an ETF is usually evaluated by analyzing tracking errors (TEs), i.e. the difference between the movement of its price and the benchmark. The main aim of the article is to examine the tracking efficiency of 14 ETFs listed on European exchanges that try to mirror the performance of the MSCI Emerging Markets Index in 2012-2017. The study has revealed that ETFs are quite effectively managed as TE values were generally lower than those presented in the literature. The results also show that the TE values achieved by the standard deviation of the difference between the return of the fund and that of its benchmark index were similar to those obtained via the method of standard error of regression. Besides, the lowest TE values were observed at weekly intervals, whereas the highest at daily ones. (original abstract)

Słowa kluczowe

EN

Exchange Traded Fund (ETF); Investment funds; Emerging markets; Research results

PL

Fundusze ETF; Fundusze inwestycyjne; Rynki wschodzące; Wyniki badań

• Czasopismo: Bank i Kredyt
• Rocznik: 2019
• Numer: nr 3
• Strony: 221--248

Twórcy

autor

Tomasz Miziołek

• University of Lodz

autor

Ewa Feder-Sempach

• University of Lodz

Bibliografia

• Banerjee S. (2015a), Effectiveness of ETFs in indexing: the mean for equity investments by employees' provident funds in India, American Journal of Business. Economics and Management, 3(5), 300-304.
• Banerjee S. (2015b), Measurement of tracking error based on category index - the hidden cost of index funds, American Journal of Theoretical and Applied Business, 1(1), 37-40.
• Bekaert G., Harvey C. (1995), Time varying world market integration, The Journal of Finance, 50(2), 403-444.
• Bernstein P.J. (2002), A primer on exchange-traded funds, Journal of Accountancy, 193(1), 38-41.
• Black Rock (2011), ETF landscape, Emerging Market ETFs Industry Review, May, Global ETF Research and Implementation Strategy Team.
• Blitz D., Huij J. (2012), Evaluating the performance of global emerging markets equity exchange-traded funds, Emerging Markets Review, 13(2), 149-158.
• Elton E.J., Gruber M.J., Comer G., Li K. (2002), Spiders: Where are the bugs?, Journal of Business, 75(3), 453-472.
• ETFGI (2018a), ETFGI reports assets invested in ETFs and ETPs listed globally reached a new high of $5.12 trillion at the end of July 2018, https://etfgi.com/news/press-releases/2018/08/etfgi-reports-assets- invested-etfs-and-etps-listed-globally-reached-new.
• ETFGI (2018b), Europe ETF and ETP industry insights - December 2010, https://etfgi.com/research/ report/17917/europe-etf-and-etp-industry-insights-december-2017.
• Fuhr D. (2003), ETFs for Emerging Markets Exposure, Morgan Stanley Equity Research Europe.
• Gallagher D.R., Segara R. (2006), The performance and trading characteristics of exchange-traded funds, Journal of Investment Strategy, 1(2), 49-60.
• Hassine M., Roncalli T. (2013), Measuring performance of exchange traded funds, Journal of Index Investing, 4(3), 57-85.
• Johnson W.F. (2008), Tracking errors of exchange traded funds, Journal of Asset Management, 10 (4), 253-262.
• Johnson B., Bioy H., Kellett A., Davidson L. (2013), On the right track: measuring tracking efficiency in ETFs, February, Morningstar.
• Johnson B. (2017), The evolution of emerging markets (part 1), http://my.morningstar.com/ap/news/ETF- Education/163357/The-Evolution-of-Emerging-Markets-(Part-1).aspx.
• Kayali M., Unal S. (2009), Tracking accuracy of large and small-CAP ETFS: an empirical analysis of the Istanbul Stock Exchange, South East European Journal of Economics and Business, 4(1), 107-112.
• Khan A.P., Bacha O.I., Masih A.M. (2015), Performance and trading characteristics of exchange traded funds: developed vs emerging markets, Capital Markets Review, 23(1&2), 40-64.
• Kuok-Kun Chu P. (2011), Study on the tracking errors and their determinants: evidence from Hong Kong exchange traded funds, Applied Financial Economics, 21(5), 309-315.
• Lin A., Chou A. (2006), The tracking error and premium/discount of Taiwan's First Exchange Traded Fund, Web Journal of Chinese Management Review, 9(3), 1-20.
• Meziani A.S. (2016), Exchange-Traded Funds. Investment Practices and Tactical Approaches, Palgrave Macmillan.
• Milonas N.T., Rompotis G.G. (2006), Investigating European ETFs: the case of the Swiss exchange traded funds, The Annual Conference of HFAA, Thessaloniki.
• MSCI (2016), Global indexes. Delivering the modern index strategy, https://www.msci.com/ documents/1296102/1362201/GlobalIndexes-cbr-en.pdf/ed3a08b3-84bb-4e71-8d2e-8b267213cb44.
• MSCI (2018a), MSCI Emerging Markets Index (USD) factsheet, https://www.msci.com/documents/10199/ c0db0a48-01f2-4ba9-ad01-226fd5678111.
• MSCI (2018b), Emerging markets. Looking to expand your investment horizon?, https://www.msci.com/ documents/1296102/1362201/MSCI-MIS-EM-May-2018.pdf/b1b05adf-4bf3-9acc-404c-9865da3e9997.
• MSCI Barra (2008), Emerging markets: a 20-year perspective, https://www.msci.com/documents/10199/ dbc19f82-595d-4a2c-bd2d-22b593d611e5.
• Pandya F., Desai D. (2016), Evaluating index fund performance and measuring tracking error in India, Pacific Business Review International, 1(1), 204-218.
• Pope P. ,Yadav P. (1994), Discovering errors in tracking error, The Journal of Portfolio Management, 20(2), 27-32.
• Poterba J.M., Shoven J.B. (2002), Exchange traded funds: a new investment option for taxable investors, NBER Working Paper, 8781, National Bureau of Economic Research.
• Roll R. (1992), A mean/variance analysis of tracking error, The Journal of Portfolio Management, 18(4), 13-22.
• Rompotis G.G. (2008), Performance and trading characteristics of German passively managed ETFs, International Research Journal of Finance & Economics, 15, May, 210-223.
• Shin S., Soydemir G. (2010), Exchange-traded funds, persistence in tracking errors and information dissemination, Journal of Multinational Financial Management, 20(4-5), 214-234.
• Singh J., Kaur P. (2016), Tracking efficiency of Exchange Traded Funds (ETFs): empirical evidence from Indian equity ETFs, Paradigm, 20(2), 176-190.
• Smith K. (1978), The effect of intervaling on estimating parameters of the capital asset pricing model, Journal of Financial & Quantitative Analysis, 13(2), 313-332.
• Strydom B., Charteris A., McCullough K. (2015), The relative tracking ability of South African exchange traded funds and index funds, Investment Analysts Journal, 44(2), 117-133.
• Topa-Serry I., Ghotgalkar V. (2018), You're fully developed when you hit thirty, Research and Investment Insights, AXA Investment Managers, https://www.axa-im.com/documents/20195/859236/You're+ fully+developed+when+you+hit+thirty+20180207+fr/6e470154-e1b4-41c6-c81a-540a8b70eb5f.
• Yiannaki S.M. (2015), ETFs performance Europe - a good start or not?, Procedia Economics and Finance,30, 955-966.