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Return differences between DAX ETFs and the benchmark DAX

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  • Schmidhammer, Christoph

Abstract

For the DAX index market, this paper analyses the development of return differences between exchange traded funds (ETFs) and the DAX index from the perspective of long-term investors. The newly introduced methodology provides the opportunity to continuously identify long-term costs of passively managed products independent from the information of annual financial statements. This enables to test for product-specific return differences and to identify relevant cost drivers such as index returns and market makers. Results reveal that on average, DAX ETFs costs considerably exceed total expense ratios. Product-specific return differences are significant, however, differences tend to converge over time. For all ETFs, deviations are significantly influenced by index returns. Product characteristics deliver valuable arguments to explain these findings. Also market makers significantly contribute to return differences.

Suggested Citation

  • Schmidhammer, Christoph, 2021. "Return differences between DAX ETFs and the benchmark DAX," Discussion Papers 28/2021, Deutsche Bundesbank.
    • Handle: RePEc:zbw:bubdps:282021
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    More about this item

    Keywords

    Exchange Traded Funds; Net Asset Value; market maker prices; return differences; Total Expense Ratio; ETF issuers; rolling window;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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