Study on the tracking errors and their determinants: evidence from Hong Kong exchange traded funds

Abstract

This article presents the first study on the magnitude of tracking error and the determinants of tracking errors using the daily figures of the Exchange Traded Funds (ETFs) traded in Hong Kong stock market. In general, the results suggest that the tracking errors are comparatively higher than those documented in US and Australia. The magnitude of the tracking errors is also found to be negatively related to the size but positively related to the expense ratios of the funds, which are consistent with the previous studies.

Acknowledgements

The author thanks the editor, an anonymous referee, and colleagues of University of Macau for helpful comments.