The measurement of tracking errors of commodity ETFs in China

  • Published July 4, 2016
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    Volume 13 2016, Issue #2 (cont. 1), pp. 184-188
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This paper presents the first study on the measurement and determinants of tracking errors using the daily figures for gold exchange-traded funds (ETFs) in China. This study employs three methods to measure tracking errors – one that involves calculating the absolute error measure, one that involves calculating the differences between the standard deviation of the benchmark index and that of the ETF, and a regression analysis of empirical returns. In general, the results suggest that the tracking errors of these ETFs in China are lower than those of equity-based ETFs in Hong Kong, the United States, and Australia. We also observe that distinct ETFs have different determinants. Our results provide valuable insight for both institutional and retail investors, as well as opportunities for them to be exposed to a wide range of commodity ETFs in China

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