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The Performance of European Index Funds and Exchange‐Traded Funds
Author(s) -
Blitz David,
Huij Joop,
Swinkels Laurens
Publication year - 2012
Publication title -
european financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.311
H-Index - 64
eISSN - 1468-036X
pISSN - 1354-7798
DOI - 10.1111/j.1468-036x.2010.00550.x
Subject(s) - dividend , index fund , closed end fund , business , fund of funds , index (typography) , open end fund , mutual fund , passive management , income fund , expense ratio , monetary economics , institutional investor , finance , economics , corporate governance , computer science , world wide web , market liquidity
European index funds and exchange‐traded funds underperform their benchmarks by 50 to 150 basis points per annum. The explanatory power of dividend withholding taxes as a determinant of this underperformance is at least on par with fund expenses. Dividend taxes also explain performance differences between funds that track different benchmarks and time variation in fund performance. Our results imply that not only fund expenses, but also dividend taxes can result in a substantial drag on mutual fund performance.