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Tracking Performance of the United States-Listed China Real Estate ETF

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  • Hongfei Tang
  • Xiaoqing Eleanor Xu

Abstract

This article examines the tracking performance of the United States-listed Guggenheim China Real Estate Exchange-Traded Fund (NYSE ticker: TAO) relative to its underlying benchmark index (Alphashare China Real Estate Index, ACNRET) and the actual China Home Price Index (CHPI). The daily return of the TAO fund is found to be mainly driven by the U.S. market return and severely underexposed to the return on its underlying index. Examination of the behaviors and sources of the TAO fund's daily return deviation revealed the dominance of market return deviation due to nonsynchronous trading and a moderate level of NAV deviation due to the expense ratio. The nonsynchronous trading-related tracking error does not generate significant return deviation for longer holding periods, leading to a dramatically improved tracking performance. However, investors who intend to use the TAO fund to gain exposure to China's real estate market should be mindful of the fact that the TAO fund's market return or NAV return exposure to the actual China real estate market (as measured by CHPI) is extremely limited due to the lack of representation of the underlying index.

Suggested Citation

  • Hongfei Tang & Xiaoqing Eleanor Xu, 2013. "Tracking Performance of the United States-Listed China Real Estate ETF," Chinese Economy, Taylor & Francis Journals, vol. 46(5), pages 5-35, September.
    • Handle: RePEc:mes:chinec:v:46:y:2013:i:5:p:5-35
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    Cited by:

    1. Subhashis Nandy, 2016. "Empirical Observations on the Tracking Errors and the Risk-Adjusted Returns of REIT-Based Exchange Traded Funds," International Journal of Business and Management, Canadian Center of Science and Education, vol. 11(9), pages 1-63, August.

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