Do Market Conditions Affect the Tracking Efficiency of Exchange-traded Funds? Evidence from Developed and Emerging Markets

This study examines the tracking efficiency of a sample of exchange-traded funds (ETFs) from seven different emerging and developed markets, in bullish and bearish market conditions, using the data from daily closing prices. It seeks to address two major questions. First, do ETFs from both developed...

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Bibliographic Details
Published in:	Global business review
Main Authors:	Neto, Augusto Ferreira da Costa, Klötzle, Marcelo Cabús, Pinto, Antonio Carlos Figueiredo
Format:	Journal Article
Language:	English
Published:	29-08-2021
Online Access:	Get full text
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Summary:	This study examines the tracking efficiency of a sample of exchange-traded funds (ETFs) from seven different emerging and developed markets, in bullish and bearish market conditions, using the data from daily closing prices. It seeks to address two major questions. First, do ETFs from both developed and emerging markets have the same behaviour regarding tracking their underlying indexes? Second, is ETFs tracking ability affected by events that could change market conditions from a bullish to a bearish pattern, and vice-versa? Our findings suggest that tracking error appears to be higher in emerging markets when compared to developed markets. Furthermore, tracking error was found to be relatively higher in bearish conditions for developed markets, while this was quite the opposite in emerging markets.
ISSN:	0972-1509 0973-0664
DOI:	10.1177/09721509211036798