An analysis of exchange traded notes tracking errors with their underlying indexes and indicative values

Abstract

This study employs five commonly used methods to estimate tracking errors between iPath Exchange Traded Notes (ETNs) and their respective indexes. Commodity ETNs perform well in tracking their respective indexes. This performance is not dependent on whether the ETN tracks a single commodity index, a sector or a composite index. Currency and emerging market ETNs do not track their underlying indexes nearly as well.

Keywords:

• commodities
• ETNs
• ETFs
• tracking

JEL Classification::

• G10
• G20

Notes

¹ For a detailed discussion, see Wright et al. (2010).