Footnote:
In: Journal of Investing, Forthcoming
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments July 24, 2014 erstellt
Description:
This paper focuses on the replication process of exchange traded funds (ETFs). It compares the tracking ability of ETFs based on physical replication of their benchmark indices to those of synthetic ETFs. Synthetic ETFs rely on derivatives such as swaps. For ETFs listed at the Frankfurt Stock Exchange we show that both categories of ETFs suffer from high tracking errors. Contrary to conventional wisdom, synthetic equity ETFs are not different in terms of tracking errors from their physical counterparts. However, synthetic fixed income ETFs have lower tracking errors than physical fixed income ETFs. Thus synthetic ETFs have as good or better tracking errors than physical ETFs. We identify different factors influencing tracking errors