Date of Award
Spring 5-2019
Degree Type
Honors College Thesis
Department
Finance, Real Estate, and Business Law
First Advisor
Srinidhi Kanuri
Advisor Department
Finance, Real Estate, and Business Law
Abstract
Exchange Traded Funds (ETFs) are a diversified pool of assets that trade on an exchange and track an index. Tracking error is the difference between a portfolio's returns and the benchmark or index it was meant to mimic. Investors want the Exchange Traded Funds (ETFs) to track the benchmark very closely or have the tracking error as low as possible. This paper looks at the tracking errors of different S&P sector ETFs by using the average absolute differences in monthly returns between the ETF and its benchmark index. The results indicate that the Technology and Real Estate sectors have the highest tracking error while Consumer Discretionary and Consumer Staples have the lowest tracking errors. I also look at ETFs Beta which is a measure of systematic risk to determine if this measure of risk could be a source of tracking error. I find that ETFs tracking error does not depend on sector risk.
Copyright
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Recommended Citation
Haire, John, "Analysis of S&P 500 Sector ETFs" (2019). Honors Theses. 650.
https://aquila.usm.edu/honors_theses/650