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Performance and Trading Characteristics of Exchange Traded Funds: Developed vs Emerging Markets

Author

Listed:
  • Aftab Parvez Khan

    (1International Centre for Education in Islamic Finance (INCEIF), 2Taylors University Malaysia)

  • Obiyathulla Ismath Bacha

    (International Centre for Education in Islamic Finance (INCEIF))

  • Abul Mansur Mohammed Masih

    (International Centre for Education in Islamic Finance (INCEIF))

Abstract

Exchange Traded Funds (ETFs) are one of the most successful financial innovations of the last decades. The main focus of this study is to examine the risk adjusted performance, tracking error and trading characteristics of emerging and developed markets ETF. 43 passively managed equity ETFs have been chosen to cover both markets. The results indicate that the emerging markets are less efficient in terms of index replication and possess higher tracking error compared to the developed market ETF. Conversely, emerging markets provide better risk adjusted performance. Last but not least, it is also found that assets size has positive impacts towards ETFs performance and in contrast, the expense ratio has a negative impact on ETFs performance. To determine the policy matters, investment types and strategy for the two different types of capital market products, this study is quite relevant to the individual investor, institutional investors, policy makers and the regulators.

Suggested Citation

  • Aftab Parvez Khan & Obiyathulla Ismath Bacha & Abul Mansur Mohammed Masih, 2015. "Performance and Trading Characteristics of Exchange Traded Funds: Developed vs Emerging Markets," Capital Markets Review, Malaysian Finance Association, vol. 23(1&2), pages 40-64.
    • Handle: RePEc:mfa:journl:v:23:y:2015:i:1&2:p:40-64
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    Citations

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    Cited by:

    1. Ewa Feder-Sempach & Tomasz MizioĊ‚ek, 2023. "How precisely European equity ETFs mirror their flagship benchmarks? Evidence from funds replicating performance of Euro Stoxx 50 Index," Journal of Asset Management, Palgrave Macmillan, vol. 24(2), pages 121-135, March.

    More about this item

    Keywords

    Exchange Traded Funds; Capital markets; Performance; Tracking error; Trading characteristics.;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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