We examine the performance of passively managed exchange-traded funds (ETFs) that provide exposure to global emerging markets equities. We find that the tracking errors of these funds are substantially higher than previously reported levels for developed markets ETFs. ETFs that use statistical index replication techniques turn out to be especially prone to high tracking errors, and particularly so during periods of high cross-sectional dispersion in stock returns. At the same time, we find no convincing evidence that these funds earn higher returns than ETFs that rely on full-replication techniques.

ETF, emerging markets, exchange-traded funds, index fund, passive investing, performance evaluation, tracking error
Portfolio Choice; Investment Decisions (jel G11), Information and Market Efficiency; Event Studies (jel G14), General Financial Markets: Other (jel G19)
dx.doi.org/10.1016/j.ememar.2012.01.004, hdl.handle.net/1765/32021
ERIM Article Series (EAS)
Emerging Markets Review
Erasmus Research Institute of Management

Blitz, D.C, & Huij, J.J. (2012). Evaluating the performance of global emerging markets equity exchange-traded funds. Emerging Markets Review, 13(2), 149–158. doi:10.1016/j.ememar.2012.01.004