What Matters in ETF Selection?
11 Pages Posted: 17 Sep 2018 Last revised: 27 Mar 2019
Date Written: September 6, 2018
This study examines the impact of both expense ratio and tracking difference on Exchange-Traded Fund (ETF) performance. The relationship between expenses and performance is much stronger than the relationship between tracking difference and performance. This study shows that the slightly positive relationship between tracking difference and performance is attributable to the fact that funds with stronger tracking difference tend to have lower expenses. The practical implication of this study is that low costs should be the main characteristic that investors look for when selecting an ETF.
Keywords: Exchange-Traded Funds, ETFs
JEL Classification: G11, G23
Suggested Citation: Suggested Citation