The IUP Journal of Applied Finance
Performance Evaluation of Exchange Traded Funds of India

Article Details
Pub. Date : April, 2021
Product Name : The IUP Journal of Applied Finance
Product Type : Article
Product Code : IJAF30421
Author Name : Richu and Suresh K Mittal
Availability : YES
Subject/Domain : Finance
Download Format : PDF Format
No. of Pages : 12

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Abstract

The purpose of this paper is to evaluate the performance of Exchange Traded Funds (ETFs) operating in India before 2009. The performance of ETFs has been evaluated with geometric mean, standard deviation, beta, tracking error, Treynor ratio, Sharpe ratio and Jensen's alpha. It was found that some ETFs outperformed their benchmark and some underperformed their benchmark. But by testing the significance of difference, the study concluded that there is no significant difference between the performance of ETF and performance of its benchmark. The study will help the investors and managers in better understanding the performance of ETFs. ETF is an innovative product in India. There is limited study in India on ETF which is comprehensive enough to include a longer period. Originality of this study lies in its longer period of data.


Description

The First Exchange Traded Fund (ETF) in the world was Toronto Index Participation Shares ETF which was launched by Toronto Stock Exchange in 1990. After this, in 1993, an ETF named Standard & Poor's Depositary Receipts known as SPDRs or "Spiders" was introduced on NYSE which became the largest ETF in the world, tracking S&P 500 index. As of January 2014, 1,500 ETFs were traded in the US, over total assets of over $1.7 tn. In American Stock Exchange, 60% of trading volume comes from ETF and QQQs (Cubes) tracking NASDAQ- 100 index, SPDRs (Spiders) tracking S&P 500 Index, iSHARES tracking MSCI Indices and TRAHK (Tracks) tracking the Hang Seng Index are most popular ETFs of the world.

The first ETF in India was Nifty BeES (Nifty Benchmark Exchange Traded Fund), launched in January 2002, and it was launched by Benchmark Assets Management Company which tracks Nifty 50 index. Later on, Nifty BeES was taken over by Goldman Sachs Asset Management Company. At the end of 2017-18, there were 68 ETFs, of which 56 are equity ETFs and 12 are gold ETFs.


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