Evaluating tracking errors and its determinants among indian exchange traded funds Dr. Gaba Ashima1, Prof. Kumar Ravinder2 1Assistant Professor, Lakshmibai College, University of Delhi 2Dean, Faculty of Social Sciences, Jamia Millia Islamia - A Central university Online published on 7 March, 2024. Abstract Purpose Presence of tracking inefficiencies among Exchange Traded Funds (ETFs) reects the effectiveness of managerial capabilities thus understanding of such inefficiencies is of importance to investors longing to invest in ETFs. Thus, this study explores; the extent of tracking errors and thereby identify factors causing tracking errors among performance of ETFs and its underlying benchmark. Design/Methodology TFor the purpose of study sample of 29 Indian ETFs have been selected which include Equity ETFs, Gold ETFs, Debt ETFs as well as World Indices ETFs .Tracking errors of ETFs have been computed through three methods which are average absolute difference between returns, standard deviation of difference between returns and standard error of regression. Further, Panel data analysis has been applied to understand the factors affecting tracking errors. Findings Empirical analysis suggest that out that tracking errors exits for almost all the ETFs and majority of ETFs show sign of underperformance with respect to their underlying benchmark indices. Further, on scrutinizing the factors affecting tracking error, it has been brought out that volume ,age of fund, risk associated, expense ratio and volatility are noteworthy factors behind the tracking errors. Originality/Value Results of this study will be helpful to investors and other players of markets particularly arbitrageurs and hedgers who try to time the market. Moreover, this study will also be benel to prospective researchers. Top Keywords Exchange Traded Funds, Tracking Error, Panel Data Analysis, Random-effect model, Fixed-effect model. Top |