Exchange-traded funds: a market snapshot and performance analysis (with C. A. Valle and N. Meade)

We present a snapshot of the Exchange-Traded Fund (ETF) market in September 2011 involving 6937 ETFs with a total market value of US$2.96 trillion. We describe the market's growth since 1993 and its current composition. Only 11% of ETFs reproduce both the mean return and the volatility of their benchmark within 1% p.a. Discrepancies in replicating the mean return of the benchmark tended to be associated with either leveraged or inverse (or both) ETFs. With respect to replicating benchmark volatility most ETFs have higher volatility than their benchmarks.

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J E Beasley