The Performance of European Index Funds and Exchange-Traded Funds

European Financial Management, Forthcoming

Posted: 14 Feb 2011

See all articles by David Blitz

David Blitz

Robeco Quantitative Investments

Joop Huij

Erasmus University - Rotterdam School of Management; Robeco; Erasmus University Rotterdam (EUR) - Erasmus Research Institute of Management (ERIM)

Laurens Swinkels

Erasmus University Rotterdam (EUR); Robeco Quantitative Investments

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Date Written: February 14, 2011

Abstract

European index funds and exchange-traded funds underperform their benchmarks by 50 to 150 basis points per annum. The explanatory power of dividend withholding taxes as a determinant of this underperformance is at least at par with fund expenses. Dividend taxes also explain performance differences between funds that track different benchmarks and time variation in fund performance. Our results imply that not only fund expenses, but also dividend taxation can result in a substantial drag on the performance of mutual funds.

Keywords: passive investing, index fund, ETF, dividend taxes, performance evaluation

JEL Classification: G11, G14, G19

Suggested Citation

Blitz, David and Huij, Joop and Swinkels, Laurens, The Performance of European Index Funds and Exchange-Traded Funds (February 14, 2011). European Financial Management, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1761206

David Blitz (Contact Author)

Robeco Quantitative Investments ( email )

Weena 850
Rotterdam, 3014 DA
Netherlands

Joop Huij

Erasmus University - Rotterdam School of Management ( email )

P.O. Box 1738
Rotterdam, 3000 DR
Netherlands

HOME PAGE: http://www.rsm.nl/jhuij

Robeco

Rotterdam, 3014DA
Netherlands

HOME PAGE: http://www.robeco.com/

Erasmus University Rotterdam (EUR) - Erasmus Research Institute of Management (ERIM)

P.O. Box 1738
Rotterdam, 3000 DR
Netherlands

Laurens Swinkels

Erasmus University Rotterdam (EUR) ( email )

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA
Netherlands

Robeco Quantitative Investments ( email )

Rotterdam, 3000
Netherlands
+31 10 224 2470 (Phone)
+31 10 224 2110 (Fax)

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