Open AccessComparative Performance Analysis of Index ETFs and Index Funds
Author(s) -
Aakanksha Sethi
Publication year - 2018
Publication title -
mudra : journal of finance and accounting
Language(s) - English
Resource type - Journals
eISSN - 2395-2598
pISSN - 2347-4467
DOI - 10.17492/mudra.v4i02.11449
Subject(s) - index fund , index (typography) , sharpe ratio , wilcoxon signed rank test , passive management , tracking error , econometrics , business , statistics , data envelopment analysis , institutional investor , mathematics , economics , computer science , finance , portfolio , open end fund , corporate governance , control (management) , management , world wide web , mann–whitney u test
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.