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Investment Performance and Tracking Efficiency of Indian Equity Exchange Traded Funds

Author

Listed:
  • L. Alamelu

    (St. Joseph’s College of Commerce)

  • Nisha Goyal

    (Dayanand Sagar University)

Abstract

Exchange Traded Funds (ETF’s) are one of the beloved passively managed funds that offer both retail and institutional investors an access to highly profitable and wide- range of diversifiable financial assets. The study aims to assess the ability of Indian equity ETF’s in replicating the performance of their benchmark indices using a sample of 27 equity ETF’s traded on the National Stock Exchange of India during the pre-pandemic period from 01/01/2015 to 31/12/2019. Evaluation of the performance of sample ETF’s through risk-return analysis, risk-adjusted performance measures, tracking error analysis and multi-factor regression have revealed that the majority of the sample ETF’s outperformed their tracking indices but with notable tracking errors during the study period. Further, the study also indicates that the returns of the sample ETF’s have a significant and positive relationship with the returns of the index but are inversely related to risk and management fees. The results of this study will have major implications for investors in evaluating the performance of ETF’s and fund managers as well in taking suitable measures to reduce tracking errors that will help in successful replication of the benchmark along with undertaking initiatives that will enable the ETF’s to become price efficient.

Suggested Citation

  • L. Alamelu & Nisha Goyal, 2023. "Investment Performance and Tracking Efficiency of Indian Equity Exchange Traded Funds," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 30(1), pages 165-188, March.
    • Handle: RePEc:kap:apfinm:v:30:y:2023:i:1:d:10.1007_s10690-022-09379-3
    DOI: 10.1007/s10690-022-09379-3
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    References listed on IDEAS

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    Cited by:

    1. Renu Jonwall & Seema Gupta & Shuchi Pahuja, 2025. "Performance Evaluation of Socially Responsible Funds Compared to Their Benchmark Index in India: Evidence from the Covid-19 Crisis," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 32(2), pages 489-523, June.
    2. Gerasimos G. Rompotis, 2025. "Tracking efficiency of Australian equity ETFs," Journal of Asset Management, Palgrave Macmillan, vol. 26(2), pages 159-175, March.
    3. Hu, Dongmei & Liang, Hengyue & Yuan, Zhiqi, 2024. "Excess return and tracking errors of Chinese ETFs," Finance Research Letters, Elsevier, vol. 67(PA).

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    More about this item

    Keywords

    Exchange Traded Funds; Return; Risk; Tracking errors;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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