EconPapers    
Economics at your fingertips  
 

Exchange-traded funds, persistence in tracking errors and information dissemination

Sangheon Shin and Gokce Soydemir ()

Journal of Multinational Financial Management, 2010, vol. 20, issue 4-5, 214-234

Abstract: We estimate tracking errors from 26 exchange-traded funds (ETFs) utilizing three different methods and test their relative performance using Jensen's model. We find that tracking errors are significantly different from zero and display persistence. Based on Jensen's alpha, risk adjusted returns are significantly inferior to benchmark returns for all ETFs with two exceptions at conventional significance levels revealing that passive investment strategy does not outperform market returns. We then examine the degree to which frequently used factors such as expense ratio, dividends, exchange rate and spreads of trading prices may be underlying sources of tracking errors causing this underperformance. We find that the change in the exchange rate is a significant source of tracking errors. Our serial correlation test, runs test and panel regression analysis reveal that Asian markets display relatively greater persistence and therefore are less efficient in disseminating information and noisier in filtering the information contained in returns.

Keywords: G12; G14; G15; Exchange-traded; funds; Tracking; errors; Persistence (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1042-444X(10)00017-4
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:mulfin:v:20:y:2010:i:4-5:p:214-234

Access Statistics for this article

Journal of Multinational Financial Management is currently edited by I. Mathur and G. G. Booth

More articles in Journal of Multinational Financial Management from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

 
Page updated 2019-07-02
Handle: RePEc:eee:mulfin:v:20:y:2010:i:4-5:p:214-234