Affiliation:
1. Pontificia Universidade Catolica do Rio de Janeiro, Rua Marquês de São Vicente, Gávea, Rio de Janeiro, Brazil.
Abstract
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.
Subject
Business and International Management
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