Is the tracking error time-varying? Evidence from agricultural ETCs

Devmali Perera, Jędrzej Białkowski and Martin T. Bohl

Research in International Business and Finance, 2022, vol. 63, issue C

Abstract: This study extensively analyses a recently popularized asset class, exchange-traded commodities (ETCs). We demonstrate that the tracking error of ETCs is dependent on the volatility of the underlying commodity prices but not persistent. Furthermore, we find the tracking ability of agricultural ETCs is affected by the replication method and the leverage of the ETCs. Our findings are important for academics and market regulators as they indicate the structure of an ETC and the time-varying volatility of agricultural prices matters for its tracking performance.

Keywords: Agricultural commodity market; Exchange-traded commodities; Markov switching regression; Tracking error (search for similar items in EconPapers)
JEL-codes: C24 G14 G23 Q14 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:63:y:2022:i:c:s027553192200126x

DOI: 10.1016/j.ribaf.2022.101738

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