Submitted:
29 July 2016
Posted:
29 July 2016
You are already at the latest version
Abstract
This paper uses panel data to find the determinants of tracking errors in exchange traded funds (ETFs) in the Hong Kong stock market. A comparison of tracking errors between physical and synthetic ETFs also indicates that the synthetic ETFs have higher tracking errors. The magnitude of tracking errors is found to be negatively related to size but positively related to dividend yield, trading volumes of funds, and market risk. However, this study also finds that expense ratio has a negative impact on tracking error, which is not consistent with previous studies, and which this paper addresses.
Keywords:
Exchange traded funds
; ETFs
; tracking error
; panel regression model
; fixed effects estimation
Copyright: This open access article is published under a Creative Commons CC BY 4.0 license, which permit the free download, distribution, and reuse, provided that the author and preprint are cited in any reuse.
