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Performance of US and European Exchange Traded Funds: A Base Point-Slack-Based Measure Approach

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  • Carla O. Henriques

    (Polytechnic Institute of Coimbra, Coimbra Business School|ISCAC, Bencanta, 3040-316 Coimbra, Portugal
    INESCC, Departamento de Engenharia Electrotécnica e de Computadores, University of Coimbra, Polo 2, 3030-290 Coimbra, Portugal
    CeBER, Faculty of Economics, University of Coimbra, Av Dias da Silva 165, 3004-512 Coimbra, Portugal)

  • Maria E. Neves

    (Polytechnic Institute of Coimbra, Coimbra Business School|ISCAC, Bencanta, 3040-316 Coimbra, Portugal
    Centre for Transdisciplinary Development Studies (CETRAD), University of Trás-os-Montes and Alto Douro, 5000-801 Vila Real, Portugal)

  • Jeremias A. Conceição

    (Polytechnic Institute of Coimbra, Coimbra Business School|ISCAC, Bencanta, 3040-316 Coimbra, Portugal)

  • Elisabete S. Vieira

    (GOVCOPP Unit Research, ISCA-UA|University of Aveiro, Campus Universitário, 3810-902 Aveiro, Portugal)

Abstract

This study evaluates the performance of United States (US) and European Exchange Traded Funds (ETFs) using the non-oriented version of the base point-slack-based measure (BP-SBM) Data Envelopment Analysis (DEA) model, which allows for handling negative data that can arise in some of the metrics traditionally used in this type of analysis. Our findings show that US efficient ETFs are considered benchmarks more often than European efficient ETFs. Nonetheless, it was possible to conclude that European inefficient ETFs were generally less inefficient than US ETFs. Our findings also show that ETFs’ efficiency (particularly for US ETFs) in the short run is more related to risk than to profitability factors. This implies that as the time horizon lengthens, the importance of profitability factors for the ETFs’ financial performance grows.

Suggested Citation

  • Carla O. Henriques & Maria E. Neves & Jeremias A. Conceição & Elisabete S. Vieira, 2023. "Performance of US and European Exchange Traded Funds: A Base Point-Slack-Based Measure Approach," JRFM, MDPI, vol. 16(2), pages 1-34, February.
    • Handle: RePEc:gam:jjrfmx:v:16:y:2023:i:2:p:130-:d:1070461
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    References listed on IDEAS

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    1. Satya Ranjan Acharya & Amit Kumar Dwivedi & Bhumika Darshak Panchal, 2015. "Application of data envelopment analysis on Indian gold ETFs," International Journal of Business Continuity and Risk Management, Inderscience Enterprises Ltd, vol. 6(2), pages 147-161.
    2. Michael C. Jensen, 1968. "The Performance Of Mutual Funds In The Period 1945–1964," Journal of Finance, American Finance Association, vol. 23(2), pages 389-416, May.
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    4. Roll, Richard, 1978. "Ambiguity when Performance is Measured by the Securities Market Line," Journal of Finance, American Finance Association, vol. 33(4), pages 1051-1069, September.
    5. Admati, Anat R & Ross, Stephen A, 1985. "Measuring Investment Performance in a Rational Expectations Equilibrium Model," The Journal of Business, University of Chicago Press, vol. 58(1), pages 1-26, January.
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