Analyzing the Sources of Tracking Error for Cash Index-An Empirical Investigation for the Local Index Fund in Taiwan

• Main Authors: Hsieh Sheng-fuu, 薛勝府
• Other Authors: Lee Chin-shen
• Format: Others
• Language: zh-TW
• Published: 1998
• Online Access: http://ndltd.ncl.edu.tw/handle/27917997937820777933

碩士 === 銘傳大學 === 財務金融學系 === 86 === This thesis analyzes the sources of index fund tracking errors and compare the tracking performance of local index funds. In order to analyze the relative effects of dependent variable with regard to independent variables, this thesis simulates portfolios through replicating three local index funds and the Taiwan Weighted Stock Index to impute weighting errors and sampling errors. Four independent variables are assigned into the OLS model by adding two dummy variables. Furthermore, the trend regression model and root MSE statistic are employed to measure the tracking performance. Finally, this thesis studies the relevant issues for the construction of Taiwan Index Depositary Receipt or the TIDR. Three local index funds in Taiwan are used to perform the empirical research. The results are as follows: If the number of invested stocks is up to some amount, the impact on total tracking error from weighting error is more significant than the sampling error. For these three index funds, the tracking errors of the President Magic Power Fund can almost be eliminated by improving weighting and sampling strategies while the China 100 Fund is inferior to the President Magic Power Fund. However, the tracking error of the GP Index Type Fund can only be slightly removed. As regards to tracking performance, GP Index Type Fund is better than the other two index funds; President Magic Power Fund is the worst.