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The Performance of European Index Funds and Exchange†Traded Funds

Author

Listed:
  • David Blitz
  • Joop Huij
  • Laurens Swinkels

Abstract

European index funds and exchange†traded funds underperform their benchmarks by 50 to 150 basis points per annum. The explanatory power of dividend withholding taxes as a determinant of this underperformance is at least on par with fund expenses. Dividend taxes also explain performance differences between funds that track different benchmarks and time variation in fund performance. Our results imply that not only fund expenses, but also dividend taxes can result in a substantial drag on mutual fund performance.

Suggested Citation

  • David Blitz & Joop Huij & Laurens Swinkels, 2012. "The Performance of European Index Funds and Exchange†Traded Funds," European Financial Management, European Financial Management Association, vol. 18(4), pages 649-662, September.
    • Handle: RePEc:bla:eufman:v:18:y:2012:i:4:p:649-662
    DOI: 10.1111/j.1468-036X.2010.00550.x
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    References listed on IDEAS

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    1. Roger Otten & Dennis Bams, 2002. "European Mutual Fund Performance," European Financial Management, European Financial Management Association, vol. 8(1), pages 75-101, March.
    2. Timo P. Korkeamaki & Thomas I. Smythe, 2004. "Effects of Market Segmentation and Bank Concentration on Mutual Fund Expenses and Returns: Evidence from Finland," European Financial Management, European Financial Management Association, vol. 10(3), pages 413-438, September.
    3. repec:bla:jfinan:v:59:y:2004:i:1:p:261-288 is not listed on IDEAS
    4. Rogér Otten & Dennis Bams, 2007. "The Performance of Local versus Foreign Mutual Fund Managers," European Financial Management, European Financial Management Association, vol. 13(4), pages 702-720, September.
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    6. James M. Poterba & John B. Shoven, 2002. "Exchange-Traded Funds: A New Investment Option for Taxable Investors," American Economic Review, American Economic Association, vol. 92(2), pages 422-427, May.
    7. Sofia B. Ramos, 2009. "The Size and Structure of the World Mutual Fund Industry," European Financial Management, European Financial Management Association, vol. 15(1), pages 145-180, January.
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    Cited by:

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    4. Chen, Mei-Ping & Lee, Chien-Chiang & Hsu, Yi-Chung, 2017. "Investor sentiment and country exchange traded funds: Does economic freedom matter?," The North American Journal of Economics and Finance, Elsevier, vol. 42(C), pages 285-299.
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    8. Czereszenko, Witalij, 2021. "Pursuing the aim of Exchange Traded Funds at the time of Covid-19," MPRA Paper 111319, University Library of Munich, Germany.
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