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Excess return and tracking errors of Chinese ETFs

Author

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  • Hu, Dongmei
  • Liang, Hengyue
  • Yuan, Zhiqi

Abstract

We adopt 72 passive equity exchange-traded funds (ETFs) from the Chinese A-share market to examine the size and time-varying characteristics of their tracking errors, identify their determinants, and gain insight into the persistent and positive excess returns. Net asset value traces index better than closing price does; surviving ETFs perform better than delisted ones. The common determinants are fund expenses, liquidity and volatility of the index. Many determinants asymmetrically influence the tracking errors in bull and bear markets. Further examination based on the capital asset pricing model indicates persistent positive excess return is a result of A-share market inefficiency.

Suggested Citation

  • Hu, Dongmei & Liang, Hengyue & Yuan, Zhiqi, 2024. "Excess return and tracking errors of Chinese ETFs," Finance Research Letters, Elsevier, vol. 67(PA).
    • Handle: RePEc:eee:finlet:v:67:y:2024:i:pa:s1544612324008882
    DOI: 10.1016/j.frl.2024.105858
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    References listed on IDEAS

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    More about this item

    Keywords

    Exchange-traded funds; Tracking errors; Excess return; Delisted fund;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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