IDEAS home Printed from https://ideas.repec.org/a/eee/finlet/v40y2021ics1544612320305389.html
   My bibliography  Save this article

Performance comparisons between ETFs and traditional index funds: Evidence from China

Author

Listed:
  • Wu, Chunying
  • Xiong, Xiong
  • Gao, Ya

Abstract

Passive investment might be the mainstream of individual investors in the Chinese stock market. Thus, it is important to understand and choose among the multiple passive vehicles following any index. Our results indicate that ETFs have relatively better performance than the index funds, both pre-expense and post-expense. Further examination shows the decentralization effect of ETF during the turbulent period is greater than that of index funds, but the benefits of diversification through this investment vehicle are limited.

Suggested Citation

  • Wu, Chunying & Xiong, Xiong & Gao, Ya, 2021. "Performance comparisons between ETFs and traditional index funds: Evidence from China," Finance Research Letters, Elsevier, vol. 40(C).
    • Handle: RePEc:eee:finlet:v:40:y:2021:i:c:s1544612320305389
    DOI: 10.1016/j.frl.2020.101740
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1544612320305389
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.frl.2020.101740?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Mohammad Sharifzadeh & Simin Hojat, 2012. "An analytical performance comparison of exchange-traded funds with index funds: 2002–2010," Journal of Asset Management, Palgrave Macmillan, vol. 13(3), pages 196-209, June.
    2. Edwin J. Elton, 2002. "Spiders: Where Are the Bugs?," The Journal of Business, University of Chicago Press, vol. 75(3), pages 453-472, July.
    3. Luca J. Liebi, 2020. "The effect of ETFs on financial markets: a literature review," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 34(2), pages 165-178, June.
    4. Elton, Edwin J. & Gruber, Martin J. & de Souza, Andre, 2019. "Passive mutual funds and ETFs: Performance and comparison," Journal of Banking & Finance, Elsevier, vol. 106(C), pages 265-275.
    5. Agapova, Anna, 2011. "Conventional mutual index funds versus exchange-traded funds," Journal of Financial Markets, Elsevier, vol. 14(2), pages 323-343, May.
    6. Blitz, David & Huij, Joop, 2012. "Evaluating the performance of global emerging markets equity exchange-traded funds," Emerging Markets Review, Elsevier, vol. 13(2), pages 149-158.
    7. Gerasimos G Rompotis, 2009. "Interfamily competition on index tracking: The case of the vanguard ETFs and index funds," Journal of Asset Management, Palgrave Macmillan, vol. 10(4), pages 263-278, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. YAO, Dongmin & ZHOU, Shiyu & CHEN, Yijing, 2022. "Price effects in the Chinese stock market: Evidence from the China securities index (CSI300) based on regression discontinuity," Finance Research Letters, Elsevier, vol. 46(PB).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Damien Kunjal & Faeezah Peerbhai & Paul-Francois Muzindutsi, 2021. "The performance of South African exchange traded funds under changing market conditions," Journal of Asset Management, Palgrave Macmillan, vol. 22(5), pages 350-359, September.
    2. Marszk, Adam & Lechman, Ewa, 2021. "Reshaping financial systems: The role of ICT in the diffusion of financial innovations – Recent evidence from European countries," Technological Forecasting and Social Change, Elsevier, vol. 167(C).
    3. Prabhdeep Kaur & Jaspal Singh & Sidharath Seth, 2021. "Investigating the Dynamics of Exchange Traded Funds Across the Bear and Bull Markets: Evidence from Indian Equity ETFs," Vision, , vol. 25(3), pages 350-360, September.
    4. Hilliard, Jitka, 2014. "Premiums and discounts in ETFs: An analysis of the arbitrage mechanism in domestic and international funds," Global Finance Journal, Elsevier, vol. 25(2), pages 90-107.
    5. Gerasimos G Rompotis, 2012. "Does the law of one price apply to dually listed ETFs belonging to the same family? Evidence from iShares," Journal of Asset Management, Palgrave Macmillan, vol. 13(6), pages 401-420, December.
    6. Dobson, Peter, 2020. "ETFs tracking errors on global markets with consideration of regional diversity," MPRA Paper 103695, University Library of Munich, Germany.
    7. Czereszenko, Witalij, 2021. "Pursuing the aim of Exchange Traded Funds at the time of Covid-19," MPRA Paper 111319, University Library of Munich, Germany.
    8. Patrick Kuok-Kun Chu, 2016. "Analysis and Forecast of Tracking Performance of Hong Kong Exchange-Traded Funds: Evidence from Tracker Fund and X iShares A50," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 19(04), pages 1-26, December.
    9. Marszk, Adam & Lechman, Ewa, 2019. "New technologies and diffusion of innovative financial products: Evidence on exchange-traded funds in selected emerging and developed economies," Journal of Macroeconomics, Elsevier, vol. 62(C).
    10. Carlos Manuel Pinheiro & Hugo Hilário Varela, 2018. "Do Exchange Traded Funds (ETFs) Outperform the Market? Evidence from the Portuguese Stock Index," GEE Papers 0109, Gabinete de Estratégia e Estudos, Ministério da Economia, revised Sep 2018.
    11. Priya Malhotra & Pankaj Sinha, 2023. "Exchange-traded Funds in India Amid COVID-19 Crisis: An Empirical Analysis of the Performance," Metamorphosis: A Journal of Management Research, , vol. 22(1), pages 38-54, June.
    12. Lechman, Ewa & Marszk, Adam, 2015. "ICT technologies and financial innovations: The case of exchange traded funds in Brazil, Japan, Mexico, South Korea and the United States," Technological Forecasting and Social Change, Elsevier, vol. 99(C), pages 355-376.
    13. Gerasimos G. Rompotis, 2011. "ETFs vs. Mutual Funds: Evidence from the Greek Market," South-Eastern Europe Journal of Economics, Association of Economic Universities of South and Eastern Europe and the Black Sea Region, vol. 9(1), pages 67-84.
    14. Christoph Schmidhammer & Sebastian Lobe & Klaus Röder, 2014. "The real benchmark of DAX index products and the influence of information dissemination: A natural experiment," Journal of Asset Management, Palgrave Macmillan, vol. 15(2), pages 129-149, April.
    15. Charteris, Ailie & Chau, Frankie & Gavriilidis, Konstantinos & Kallinterakis, Vasileios, 2014. "Premiums, discounts and feedback trading: Evidence from emerging markets' ETFs," International Review of Financial Analysis, Elsevier, vol. 35(C), pages 80-89.
    16. Perera, Devmali & Białkowski, Jędrzej & Bohl, Martin T., 2022. "Is the tracking error time-varying? Evidence from agricultural ETCs," Research in International Business and Finance, Elsevier, vol. 63(C).
    17. Bae, Kyounghun & Kim, Daejin, 2020. "Liquidity risk and exchange-traded fund returns, variances, and tracking errors," Journal of Financial Economics, Elsevier, vol. 138(1), pages 222-253.
    18. S. Narend & M. Thenmozhi, 2016. "What drives fund flows to index ETFs and mutual funds? A panel analysis of funds in India," DECISION: Official Journal of the Indian Institute of Management Calcutta, Springer;Indian Institute of Management Calcutta, vol. 43(1), pages 17-30, March.
    19. Mikica Drenovak & Branko Urošević & Ranko Jelic, 2014. "European Bond ETFs: Tracking Errors and the Sovereign Debt Crisis," European Financial Management, European Financial Management Association, vol. 20(5), pages 958-994, November.
    20. Jaspal Singh & Prabhdeep Kaur, 2016. "Tracking Efficiency of Exchange Traded Funds (ETFs)," Paradigm, , vol. 20(2), pages 176-190, December.

    More about this item

    Keywords

    Index funds; Exchange traded funds; Comparative performance;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:finlet:v:40:y:2021:i:c:s1544612320305389. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/frl .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.