30 Pages Posted: 1 May 2007
Date Written: April 2007
This paper investigates the seasonal characteristics of ETFs return, risk, tracking error and volume and reveals the existence of a strong November effect in performance. The paper also demonstrates the inexistence of any persistent and univocal January effect in ETFs performance. Considering the volatility and the tracking error of ETFs, the paper demonstrates that a semi-strong seasonality in risk of ETFs exists during November and that ETFs achieve their best replication performance in November too. The combination of high average performance and low average risk and tracking error signals an opportunity for investors to gain sufficient returns by exposing themselves in modest or low volatility and tracking failure. Also, a straightforward relationship among risk and tracking error is demonstrated by the paper. Finally, the study indicates that there is no a specific and stead monthly effect in ETFs trading activity but there is some evidence for the direct conjuncture among risk and volume. This positive connection is basically interpreted in selling of ETF shares when investors perceive that their investments are over risky.
Keywords: ETFs, performance, volatility, tracking error, volume, seasonality
JEL Classification: G11, G15
Suggested Citation: Suggested Citation
Rompotis, Gerasimos Georgiou, The Seasonal Patterns in ETFs Performance, Volatility and Trading Activity (April 2007). Available at SSRN: https://ssrn.com/abstract=983467 or http://dx.doi.org/10.2139/ssrn.983467
By Sophia Hamm