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Title: Tracking Risk of Exchange Traded Funds : A Multivariate Regression Approach
Authors : Merz, Thomas
Publisher / Ed. Institution : ZHAW Zürcher Hochschule für Angewandte Wissenschaften
Publisher / Ed. Institution: Winterthur
Issue Date: Jan-2015
Series : SML Working Paper
Series volume: 4
Language : German
Subjects : exchange-traded funds; physical ETFs; synthetic ETFs; tracking risk; tracking; tracking difference
Subject (DDC) : 332: Financial economics
Abstract: This empirical study investigates the ability of exchange-traded funds (ETFs) to replicate the risk-return characteristics of their respective benchmarks accurately. By decomposing ex-post tracking performance, this study finds that the commonly used measure, tracking error, rarely sufficiently explains the deviation from the benchmark and hence has very limited predicting power for assessing the tracking quality of an ETF. The results presented here clearly indicate that in many cases a linear metric is a more reliable predictor for future return deviations and that, therefore, the total cost of administrating an ETF provides a fairly good estimate of its tracking quality.
Further description : Working Paper
Departement: School of Management and Law
Publication type: Working Paper – Expertise – Study
DOI : 10.21256/zhaw-993
Appears in Collections:Banking, Finance, Insurance

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