Tracking errors of exchange traded funds

William F Johnson ()
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William F Johnson: Barry Kaye College of Business, Florida Atlantic University

Journal of Asset Management, 2009, vol. 10, issue 4, No 5, 253-262

Abstract: Abstract This article constitutes a comprehensive study of 20 foreign country exchange traded funds (ETFs) and the underlying index returns from 1997 to 2006. The purpose of the study is to explain the existence of tracking errors between foreign ETFs and the underlying home index on a daily and monthly return basis and what contributes to these differences across time and across countries. This study concludes all, but one market segmentation/integration index rankings proved to be insignificant. Variables such as foreign index positive returns relative to the US index and whether the foreign exchange trades simultaneously with the US markets were significant explanatory variables in the correlation coefficients between ETFs and their underlying home index.

Keywords: exchange traded funds; correlation; financial integration; tracking error; international investing (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (9)

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DOI: 10.1057/jam.2009.10

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