Excess return and tracking errors of Chinese ETFs

Dongmei Hu, Hengyue Liang and Zhiqi Yuan

Finance Research Letters, 2024, vol. 67, issue PA

Abstract: We adopt 72 passive equity exchange-traded funds (ETFs) from the Chinese A-share market to examine the size and time-varying characteristics of their tracking errors, identify their determinants, and gain insight into the persistent and positive excess returns. Net asset value traces index better than closing price does; surviving ETFs perform better than delisted ones. The common determinants are fund expenses, liquidity and volatility of the index. Many determinants asymmetrically influence the tracking errors in bull and bear markets. Further examination based on the capital asset pricing model indicates persistent positive excess return is a result of A-share market inefficiency.

Keywords: Exchange-traded funds; Tracking errors; Excess return; Delisted fund (search for similar items in EconPapers)
JEL-codes: G11 G12 G23 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:67:y:2024:i:pa:s1544612324008882

DOI: 10.1016/j.frl.2024.105858

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