The Performance of European Index Funds and Exchange‐Traded Funds
14 Pages Posted: 23 Aug 2012
There are 3 versions of this paper
The Performance of European Index Funds and Exchange-Traded Funds
The Performance of European Index Funds and Exchange‐Traded Funds
The Performance of European Index Funds and Exchange-Traded Funds
Date Written: September 2012
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 on 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 taxes can result in a substantial drag on mutual fund performance.
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