Evaluating the Performance of Global Emerging Markets Equity Exchange-Traded Funds
Robeco Asset Management - Quantitative Strategies
Erasmus University - Rotterdam School of Management; Robeco Quantitative Strategies; Erasmus University Rotterdam (EUR) - Erasmus Research Institute of Management (ERIM)
February 8, 2011
We examine the performance of passively managed exchange-traded funds (ETFs) that provide exposure to global emerging markets equities. We find that the tracking errors of these funds are substantially higher than previously reported levels for developed markets ETFs. ETFs that use statistical index replication techniques turn out to be especially prone to high tracking errors, and particularly so during periods of high cross-sectional dispersion in stock returns. At the same time, we find no convincing evidence that these funds earn higher returns than ETFs that rely on full-replication techniques.
Number of Pages in PDF File: 29
Keywords: passive investing, index fund, ETF, emerging markets, performance evaluation, dividend taxes, tracking error
JEL Classification: G11, G14, G19working papers series
Date posted: February 10, 2011 ; Last revised: January 13, 2012
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