scholarly journals Tracking errors and their determinants: Evidence from Hong Kong exchange traded funds

2016 ◽  
Author(s):  
Patrick Kuok-Kun Chu
Keyword(s):  
Hong Kong ◽  
Panel Data ◽  
Stock Market ◽  
Negative Impact ◽  
Tracking Error ◽  
Exchange Traded Funds ◽  
Dividend Yield ◽  
Tracking Errors ◽  
Expense Ratio ◽  
Trading Volumes

This paper uses panel data to find the determinants of tracking errors in exchange traded funds (ETFs) in the Hong Kong stock market. A comparison of tracking errors between physical and synthetic ETFs also indicates that the synthetic ETFs have higher tracking errors. The magnitude of tracking errors is found to be negatively related to size but positively related to dividend yield, trading volumes of funds, and market risk. However, this study also finds that expense ratio has a negative impact on tracking error, which is not consistent with previous studies, and which this paper addresses.

Tracking Errors and Their Determinants

2021 ◽  
Vol 15 (1) ◽  
Author(s):  
Patrick Kuok Kun Chu ◽  
Dan Xu
Keyword(s):  
Fixed Effects ◽  
Economies Of Scale ◽  
Stock Exchange ◽  
Tracking Error ◽  
Market Risk ◽  
Exchange Traded Funds ◽  
Tracking Errors ◽  
Tracking Ability ◽  
Trading Volumes ◽  
The Impact

The purposes of this study are to compare the tracking error between 53 sampled physical and 15 over-the-counter (OTC) swap-type exchange-traded funds (ETFs) on the Tokyo Stock Exchange, and to contribute to a better understanding of the impact of selected determinants on the daily tracking error. The sample synthetic ETFs are found having higher tracking error than the sampled physical ETFs. The synthetic-type ETF managers may be difficult in using derivatives to replicate the benchmark performance. A panel regression model with cross-section fixed effects indicates the tracking error of the sampled physical ETFs is negatively related to size but positively related to expense ratio, dividend yield, trading volumes, market risk, and number of constituents in the target indexes. The results conform with the hypotheses that the expense, delay in receiving dividends, the trading cost and the market risk may erode the tracking ability; on the other hand, the economies of scale will improve the tracking ability. This study may help to raise a broader discussion of potential tracking error determinants and to provide some new insights.

scholarly journals Rebalancing of exchange traded funds in stock market using option trading strategies

2021 ◽  
Vol 20 (3) ◽  
pp. 513-527
Author(s):  
Vinaykumar Elegeti
Keyword(s):  
Stock Market ◽  
Stock Markets ◽  
Tracking Error ◽  
Threshold Value ◽  
Trading Strategies ◽  
Exchange Traded Funds ◽  
Dynamic Features ◽  
Financial Industry ◽  
Option Trading ◽  
The Impact

Motivation: The finance and academic industries are highly discussed in the stock market trading domain. The increase in economic globalization shows the connection among stock markets in different countries, which produces the effect of risk conduction in the market. Forecasting the direction of every day’s stock market return is important and challenging. The growing complexity and dynamic features in stock markets are difficult in the financial industry. The inflexible trading method developed by financial practitioners utilized a larger amount of stock market features and is failed to achieve a satisfactory result in every condition of the market. Further, the existing data mining approaches are incomplete and inefficient. Aim: To overcome the issues in stock and problem of existing methods, proposed option trading strategies for rebalancing Exchange Traded Fund (ETF) in the stock market. Rebalancing-ETF measure the volatility of the stock to track the error of model and rebalance the threshold quality to improve the trade. The proposed method increases the order of threshold quantity to rebalance the trade. Results: The result showed that the minimum orders increases in rebalancing trade, which reduces the impact of price formations in market. The tracking error occurs when the larger quantity of threshold value reduces the quantity. Then, the markets are changed significantly when the Net Asset Values (NAV) of rebalancing ETF increases.

Tracking Efficiency of Exchange Traded Funds (ETFs)

Paradigm ◽  
2016 ◽  
Vol 20 (2) ◽  
pp. 176-190 ◽  
Author(s):  
Jaspal Singh ◽  
Prabhdeep Kaur
Keyword(s):  
Regression Analysis ◽  
Present Article ◽  
Mutual Fund ◽  
Negative Impact ◽  
Tracking Error ◽  
Evaluation Criteria ◽  
Panel Regression ◽  
Exchange Traded Funds ◽  
Tracking Ability ◽  
Managed Funds

Exchange traded funds (ETFs) have emerged as a new investment vehicle in the mutual fund industry providing investors with the ability to trade the entire market through a single transaction executed at the exchange. Using a sample of 12 equity ETFs from 1 April 2011 to 31 March 2015, the present article attempts to examine the performance efficiency of ETFs in India and explore factors that drive the performance of ETFs away from their target indices. The study reveals that ETFs exhibit significant tracking error while trying to replicate the returns of their benchmark indices. The results of panel regression analysis further reveal that the assets under management and volume positively affected the tracking ability of ETFs whereas volatility is reported to have negative impact on the tracking efficiency of ETFs. The results will have important implications for investors, managers as well as for the evaluation criteria involved in assessing the performance of actively managed funds.

scholarly journals Tracking Errors of Exchange Traded Funds in Bursa Malaysia

2019 ◽  
Vol 11 (2) ◽  
pp. 96
Author(s):  
Alfred Ing-Soon Ku ◽  
Venus Khim-Sen Liew ◽  
Chin-Hong Puah
Keyword(s):  
Tracking Error ◽  
Exchange Traded Funds ◽  
Tracking Errors ◽  
Retail Investors ◽  
Follow Up Studies ◽  
Tracking Ability ◽  
Selection Of

This study measures the tracking errors of exchange traded funds (ETFs) listed in Bursa Malaysia. Five measures of tracking errors are estimated in this study for the seven ETFs involved. Overall, the best ETF is METFAPA with the least tracking error. The ranking of the remainder ETFs, in the ascending order of tracking error is MYETFID, METFSID, MYETFDJ, CIMC50, FBMKLCI-EA and CIMBA40 (highest tracking error). The findings in this study is expected to provide clue for passive institutional and retail investors on their selection of ETFs to mimic the portfolio of the desired underlying assets. Moreover, it is anticipated that these findings will motivate the improvement in the tracking ability of the existing ETFs, solicit more follow up studies to encourage the development of new ETFs and increase the participation of investors.

DAMPAK PANDEMI COVID-19 TERHADAP PASAR MODAL DI INDONESIA:

2020 ◽  
Vol 2 (2) ◽  
pp. 109-138
Author(s):  
Dedi Junaedi ◽  
Faisal Salistia
Keyword(s):  
New York ◽  
Hong Kong ◽  
Stock Market ◽  
Negative Impact ◽  
Positive Impact ◽  
Task Force ◽  
Stock Exchange ◽  
Stock Index ◽  
Social Distancing ◽  
Stock Indexes

ABSTRACT This study aims to: (1) examine the influence of a pandemic on the development of the stock market (CSPI) in Indonesia; (2) analyzing the effect of externalities on the dynamics of stock market developments in Indonesia; and (3) examine whether differences in social distancing policies affect the dynamics of Indonesian capital market movements. The research method uses quantitative analysis with a dummy variable multiple regression approach. JCI as a bound variable, while the independent variable is the number of Covid-19 pandemic cases in Indonesia, China and Spain, then the movement of the FTSE100 stock indexes (London), Hangseng (Hong Kong) and NASDAQ (New York), as well as differences in social distancing policies in Indonesia (Indonesia) Task Force, WFH and PSBB). The results of the study concluded: The movement of the composite stock index (CSPI) on the Jakarta Stock Exchange is influenced by internal and external conditions. Internally the condition of the Covid-19 pandemic and social distancing (WFH and PSBB) policies in the country have influenced the dynamics of the stock market (indicated by the movement of the IHSG index on the JSX). Externally, the Covid-19 pandemic in China and Spain also influenced the dynamics of the stock market in Indonesia (IHSG index). Likewise, the dynamics of the stock market in Hong Kong (Hangseng), London (FTSE100) and News York (NASDAQ). The coronavirus pandemic in Indonesia, China, the dynamics of the Nasdaq stock market in New York, and the social dintancing (WFH and PSBB) policies had a negative impact on the movement of the JCI stock index. While the pandemic in Spain, the dynamics of the stock market in Hong Kong (Hangseng) and London (FTSE100) actually had a positive impact on stock market conditions in Indonesia (JSX). Keywords: IHSG, Stock Market, Pandemic Covid-19, Social Distancing  

DAMPAK PANDEMI COVID-19 TERHADAP PASAR MODAL DI INDONESIA:

2020 ◽  
Vol 2 (2) ◽  
pp. 109-138
Author(s):  
Dedi Junaedi ◽  
Faisal Salistia
Keyword(s):  
New York ◽  
Hong Kong ◽  
Stock Market ◽  
Negative Impact ◽  
Positive Impact ◽  
Task Force ◽  
Stock Exchange ◽  
Stock Index ◽  
Social Distancing ◽  
Stock Indexes

ABSTRACT This study aims to: (1) examine the influence of a pandemic on the development of the stock market (CSPI) in Indonesia; (2) analyzing the effect of externalities on the dynamics of stock market developments in Indonesia; and (3) examine whether differences in social distancing policies affect the dynamics of Indonesian capital market movements. The research method uses quantitative analysis with a dummy variable multiple regression approach. JCI as a bound variable, while the independent variable is the number of Covid-19 pandemic cases in Indonesia, China and Spain, then the movement of the FTSE100 stock indexes (London), Hangseng (Hong Kong) and NASDAQ (New York), as well as differences in social distancing policies in Indonesia (Indonesia) Task Force, WFH and PSBB). The results of the study concluded: The movement of the composite stock index (CSPI) on the Jakarta Stock Exchange is influenced by internal and external conditions. Internally the condition of the Covid-19 pandemic and social distancing (WFH and PSBB) policies in the country have influenced the dynamics of the stock market (indicated by the movement of the IHSG index on the JSX). Externally, the Covid-19 pandemic in China and Spain also influenced the dynamics of the stock market in Indonesia (IHSG index). Likewise, the dynamics of the stock market in Hong Kong (Hangseng), London (FTSE100) and News York (NASDAQ). The coronavirus pandemic in Indonesia, China, the dynamics of the Nasdaq stock market in New York, and the social dintancing (WFH and PSBB) policies had a negative impact on the movement of the JCI stock index. While the pandemic in Spain, the dynamics of the stock market in Hong Kong (Hangseng) and London (FTSE100) actually had a positive impact on stock market conditions in Indonesia (JSX). Keywords: IHSG, Stock Market, Pandemic Covid-19, Social Distancing  

scholarly journals Institutional Constraints on the Rate of Derivatives in Leveraged Exchange-Traded Fund

2020 ◽  
Vol 49 (2) ◽  
pp. 217-248
Author(s):  
Dowan Kim
Keyword(s):  
Tracking Error ◽  
Institutional Constraints ◽  
Exchange Traded Funds ◽  
Tracking Errors ◽  
Data Set ◽  
Asset Value ◽  
Net Asset Value ◽  
Institutional Constraint ◽  
Exchange Traded Fund ◽  
Leveraged Etf

This study confirmed whether the rate of derivatives in leveraged exchange-traded funds (ETF) calculated by derivatives and net asset value (NAV) affect their tracking errors. This research established three findings. First, when the rate of derivatives was limited at 100%, the tracking error of the leveraged ETF targeted on 2 times of the index was affected by the rate of derivatives. Second, when the rate of derivatives was eased to 200%, the same-day tracking error of the leveraged ETF targeted on 2 times of the futures index that launched after the constraints was affected by the rate of derivatives. Third, this study analyzed the constraints of the rate of derivatives after determining whether the leveraged ETF targeted on 2 times of the index indicates whether the rate of derivatives is close to 200%. As a result, even when the rate of derivatives is slightly over the 200% limit, the tracking error was lower. Even when the constraints were slightly over the limit, the tracking error was shown to be significantly lower than the other data set. This result implies that when there is an institutional constraint on the rate of derivatives, there can be limitations to fund management of leveraged ETF targeted on 2 times of the futures index.

scholarly journals The Measurement of Tracking Errors of Gold ETFS: Evidence from China

2016 ◽  
Vol 5 (1) ◽  
pp. 2 ◽  
Author(s):  
Wei-Fong Pan ◽  
Ting Li
Keyword(s):  
Hong Kong ◽  
Exchange Traded Funds ◽  
Tracking Errors ◽  
Error Measure ◽  
Wide Range ◽  
The Us ◽  
Retail Investors ◽  
Better Than

This paper presents the first study on the measurement of tracking errorsusing daily figures for gold exchange-traded funds (ETFs) in China. Threemethods are employed to measure tracking errors: 1) calculating theabsolute error measure, 2) calculating the differences between thestandard deviation of the benchmark index and the ETF, and 3) aregression analysis of empirical returns. In general, the results suggest thatthe tracking errors of these ETFs in China are lower than those of equitybasedETFs in Hong Kong, the US, and Australia. This study further appliedtwo optimised replication portfolios (50-10-10-30 and 90-2-3-5) for a totalof three types of simulation portfolio. The overall results suggest that theperformances of the optimised replication portfolios were better than theperformance of the full replication portfolio. Our results provide valuableinsight for both institutional and retail investors and the opportunity forexposure to a wide range of commodity ETFs in China.

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