Tracking effect and determinants of listed ETF

• Main Authors: Liaw,Chung-Yu, 廖崇宇
• Other Authors: Tsai, Wei-Pen
• Format: Others
• Language: zh-TW
• Published: 2012
• Online Access: http://ndltd.ncl.edu.tw/handle/75035795623571802606

碩士 === 輔仁大學 === 金融與國際企業學系金融碩士班 === 100 === To assess whether an ETF fulfills its intended purpose, we need to examine its tracking performance of the underlying index. If the tracking error between the ETF’s ROE and the return of the index is zero, then the ETF’s return is closely tracking the volatility of the index return. In other words, the ETF’s tracking performance is excellent. This paper used return rates from various periods, including: daily, 3-day, 7-day and 30-day. Then we used three different tracking performance measurements to examine ETFs openly traded on the Taiwan Stock Exchange. To determine the tracking performance, we included two more statistics: ETF’s internal operating statistics (monthly purchasing turnover, monthly sales turnover, direct transaction cost rate, fee rate) and outside investor trading statistics (volume and turnover). By using simple linear regression, we would then be able to observe if causality can be established. Our research showed that the ETF’s NAV return rate did not closely track index’s rate of return. When we used longer time periods, this observation became even more evident as opposed to smoothing out. In the case for causality, factors such as monthly purchasing turnover, monthly sales turnover, and direct transaction cost ratio demonstrated more significant impact on an ETF’s tracking performance.