Journal Press India®

Comparative Performance Analysis of Index ETFs and Index Funds

Vol 4, Issue 2, July - December 2017 | Pages: 72-94 | Research Paper  

 
Article has been added to the cart.View Cart (0)
https://doi.org/10.17492/mudra.v4i02.11449


Author Details ( * ) denotes Corresponding author

1. * Aakanksha Sethi, M.Phil. Research Scholar, Department of Commerce, Delhi School of Economics, University of Delhi, Delhi, India (sethiaakanksha3@gmail.com)

This paper is an empirical analysis of Index ETFs and Index Funds and aims to evaluate the performance of these two instruments on the basis of the following parameters –Data Envelopment Analysis (DEA), Sharpe Ratio, Active returns and Tracking Error. The examination reveals that ETFs outperformed Index Funds on all parameters during the study period except in case of tracking error. Wilcoxon Signed Rank test has also been conducted to analyse the head-to-head performance of ETFs and Index funds, here also the ETFs produce significantly superior returns. Qualitative differences between these two classes of instrument reveal that Index funds are more suited to small retail investors while ETFs are found to be better for institutional and large investors.

Keywords

ETFs; Index Funds; Data Envelopment Analysis; Passive Investing; Wilcoxon Signed Rank Test

  1. Agapova, A. (2011). Conventional mutual index funds versus exchange-traded funds. Journal of Financial Markets, 14(2), 323-343.
  2. Antoniewicz, R. S. & Heinrichs, J. (2014). Understanding Exchange-Traded Funds: How ETFs Work. Retrieved from http://dx.doi.org/10.2139/ssrn.2523540
  3. Bello, Z. Y. (2012). The relative performance of Equity Index ETFs and Equity Index Mutual Funds. European Journal of Finance and Banking Research, 5(5), 35.
  4. Bhattacharya, U., Loos, B., Meyer, S., Hackethal, A. (2017). Abusing ETFs. Review of Finance, 21(3): 1217–50
  5. Charnes, A., Cooper, W. W., & Rhodes, E. (1978). Measuring the efficiency of decision making units. European Journal of Operational Research, 2(6), 429-444.
  6. Frino, A., & Gallagher, D.R. (2001). Tracking S&P 500 Index Funds. Journal of Portfolio Management, 28(I), 44–55.
  7. Gregoriou, G. N. (2007). Efficiency of US mutual funds using data envelopment analysis. In Gregoriou, G. N. (ed.) Performance of mutual funds: An international perspective (pp 152-167). New York, NY: Palgrave Macmillan.
  8. Guedj, I., Li, G., & McCann, C. (2010).Leveraged and inverse ETFs, holding periods, and investment shortfalls. The Journal of Index Investing, 1(3), 45-57.
  9. Gupta, S., & Sethi, A. (2017). Performance appraisal of Index ETFs vis-à-vis Index funds in India. In K. Kishore, M. Arora, C. Wadhwa & R Malik (Eds.). Governance, Management and Innovation (pp 88-96). New Delhi: Excellent Publishing House.
  10. Haslem, J. A., & Scheraga, C. A. (2003).Data envelopment analysis of Morningstar's large-cap mutual funds. The Journal of Investing, 12(4), 41-48
  11. Kostovetsky, L. (2003). Index Mutual Funds and Exchange-Traded Funds. The Journal of Portfolio Management, 29(4), 80-92.
  12. Mitra, A. (2010-11). Exchange Traded Funds vis-a-vis Index Funds in India: A comparative study. Business Studies,  XXXI & XXXII. Retrieved from www.caluniv. ac.in/dj/BS-Journal/vol-31-32/exchange_traded.pdf
  13. Narend, S. (2014). Performance of ETFs and Index Funds: A comparative analysis, NSE Working Paper Retrieved from https://www1.nseindia.com/research/content/ RP_15_ Mar2014.pdf
  14. Prasanna, P. K. (2012). Performance of exchange-traded funds in India. International Journal of Business and Management, 7(23), 122-143.
  15. Poterba, J. M., & Shoven, J. B. (2002). Exchange-Traded funds: A new investment option for taxable investors. American Economic Review, 92(2), 422-427.
  16. Rompotis, G. G. (2005). An empirical comparing investigation on Exchange Traded Funds and Index Funds performance. Retrieved from SSRN: http://dx.doi.org/10.2139/ ssrn.903110
  17. Sharifzadeh, M., & Hojat, S. (2012). An analytical performance comparison of exchange-traded funds with index funds: 2002–2010. Journal of Asset Management, 13(3), 196-209.
  18. Welch, S. (2007). On performance & tracking error in Exchange-Traded Funds and Index Mutual Funds. Accounting and Finance Faculty Publications. Paper 7. Retrieved from https://digitalcommons.csbsju.edu/cgi/viewcontent.cgi?article=1006&context= acct_pub
Abstract Views: 273
PDF Views: 155

Advanced Search

News/Events

Institute of Managem...

Deccan Education Society Institute of Management Development and Re...

S.B. Patil Institute...

Pimpri Chinchwad Education Trust's S.B. Patil Institute of Mana...

D. Y. Patil IMCAM, A...

D. Y. Patil Institute of Master of Computer Applications & Managem...

Vignana Jyothi Insti...

Vignana Jyothi Institute of Management International Conference on ...

Department of Commer...

Department of Commerce, Faculty of Commerce & Business, University...

Birla Institute of M...

Birla Institute of Management Technology (BIMTECH) 3rd Pritam Singh M...

OP Jindal University...

OP Jindal University, India 4th International Conference on  ...

Department of MBA, N...

Department of MBA, Narayana Engineering College Nellore International...

Vignana Jyothi Insti...

Vignana Jyothi Institute of Management Conference Proceedings,...

Online Proceedings R...

Conference Proceedings, March 2023 ISBN: 978-81-956810-6-8 ...

By continuing to use this website, you consent to the use of cookies in accordance with our Cookie Policy.