Return differences between DAX ETFs and the benchmark DAX

Christoph Schmidhammer

No 28/2021, Discussion Papers from Deutsche Bundesbank

Abstract: For the DAX index market, this paper analyses the development of return differences between exchange traded funds (ETFs) and the DAX index from the perspective of long-term investors. The newly introduced methodology provides the opportunity to continuously identify long-term costs of passively managed products independent from the information of annual financial statements. This enables to test for product-specific return differences and to identify relevant cost drivers such as index returns and market makers. Results reveal that on average, DAX ETFs costs considerably exceed total expense ratios. Product-specific return differences are significant, however, differences tend to converge over time. For all ETFs, deviations are significantly influenced by index returns. Product characteristics deliver valuable arguments to explain these findings. Also market makers significantly contribute to return differences.

Keywords: Exchange Traded Funds; Net Asset Value; market maker prices; return differences; Total Expense Ratio; ETF issuers; rolling window (search for similar items in EconPapers)
JEL-codes: G12 G13 G14 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-fmk and nep-isf
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubdps:282021

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