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Evidence of Idiosyncratic Seasonality in ETFs Performance

Author

Listed:
  • Carlos Francisco Alves

    (Faculdade de Economia da Universidade do Porto)

  • Duarte André de Castro Reis

    (Faculdade de Economia da Universidade do Porto)

Abstract

Studies of the seasonality of ETFs are relatively scarce compared with other financial assets. Moreover, most of the existing literature on ETFs did not assess the seasonality patterns of risk-adjusted returns and tracking error. This article seeks to suppress some of these gaps. The results provide evidence of a first-half of the year effect (higher returns), an outperformance of the second quarter and an underperformance of the fourth quarter compared with the remaining quarters, and higher (lower) returns in the first (third) month of the quarter vs the other months of the quarter. Furthermore, April exhibits a superior and December an inferior performance compared with the remaining months. Besides, higher (lower) returns on Wednesdays (Fridays) were observed compared with the other weekdays. Regarding the tracking error, some seasonal patterns are also reported. For example, the replication was more accurate in April than it was in remaining months and in the first month of each quarter. Finally, the effects detected in ETFs returns were not reflected in indices returns, with the exception of the April effect, indicating that the main seasonality patterns detected are caused by idiosyncratic ETFs factors and not to the constituents of the underlying indices.

Suggested Citation

  • Carlos Francisco Alves & Duarte André de Castro Reis, 2018. "Evidence of Idiosyncratic Seasonality in ETFs Performance," FEP Working Papers 603, Universidade do Porto, Faculdade de Economia do Porto.
    • Handle: RePEc:por:fepwps:603
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    File URL: http://www.fep.up.pt/investigacao/workingpapers/wp603.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    ETFs seasonality; indices seasonality; raw returns; risk-adjusted returns; tracking error; US equity.;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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