Interfamily competition on index tracking: The case of the vanguard ETFs and index funds

Gerasimos G Rompotis ()
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Gerasimos G Rompotis: Researcher-National and Kapodistrian University of Athens, 25 Ypsilantou Street

Journal of Asset Management, 2009, vol. 10, issue 4, No 6, 263-278

Abstract: Abstract We provide evidence on the debate of ‘Exchange traded funds (ETFs) versus Index Funds’ using data of ETFs and index funds belonging to the same investing family. Data used involve the Vanguard funds and results indicate that ETFs and index funds present, on average, similar return and risk records. In addition, the risk of ETFs and index funds is similar to the risk of the tracking indices. However, the return of these alternative investing tools is slightly inferior to the return of benchmarks. Moreover, a positive relationship between return and risk is revealed. Further research demonstrates that ETFs and index funds are fully invested in their benchmarks. As a result, the tracking error for both ETFs and index funds is low. Finally, the tracking error is found to be positively affected by expenses.

Keywords: ETFs; index funds; performance; tracking error; expenses; risk (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (11)

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DOI: 10.1057/jam.2009.11

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