Examining the Performance of Indian Exchange Traded Funds (ETFs)

Аннотация

Exchange traded funds (ETFs) are known to be a highly attractive mean of investment in today’s financial markets. The present study is an attempt to explain the risk and return features of Indian ETFs and their trading and expense characteristics. The performance of ETFs is measured and compared with their underlying indices. It is found that they underperformed the indices, the reasons being they load their investors with extra risk than their underlying indices. Further, it is found that tracking error is having a positive relationship with expenses and risk of ETFs. Interestingly, the average number of trades and the lagged return of previous day do not affect the volume of shares. The study uses daily closing prices, intraday high and low prices and the volume of the traded shares of 10 ETFs listed on the National Stock Exchang for the period 1st July, 2010 to 30th June, 2015. The non-included ETFs suffer from the restrictions of non-availability of historical prices for at least five years.