Passive mutual funds and ETFs: Performance and comparison

On the informational efficiency of Saudi exchange-traded funds listed at home and away from home

“…The literature on ETFs is vast. Andreu et al (2013) divided the literature on ETFs into three main strands: the pricing efficiency (for example, (Ackert & Tian, 2000;Elton et al, 2002;Engle and Sarkar 2006;Petajisto, 2017)), the performance of ETFs measured in comparison to open-ended mutual index funds (for example, (Agapova 2011;Blitz et al, 2012;Elton et al, 2019;Kostovetsky 2003)) and close-ended funds (for example, (Harper et al, 2006;Hughen and Mathew 2009;Tsai & Swanson, 2009)), and the effect of the inception of ETFs on their underlying securities and their role in price discovery (for example, Dannhauser, 2017;Israeli et al, 2017;Madhavan & Sobczyk, 2016).…”

A Review of the Performance Measurement of Long-Term Mutual Funds

“…These authors first developed a seven-factor version of the Fama-French five-factor model, but then, they found a set of seven commercial indexes that did a better job of explaining portfolio performance than their seven-factor model. Elton, Gruber, and de Souza (2019a) showed how cluster analysis applied to the correlation structure of a large set of indexes can combine them into a smaller set. Then, they showed, following the procedure outlined in Fama and French (2018), how the set can be further reduced to a set that satisfies sufficient and necessary conditions.…”

“…For evaluation of the most popular ETF (Spider), see Elton, Gruber, Comer, and Li (2002). For comparison of the performance of index funds and ETFs, see Elton, Gruber, and de Souza (2019c). When comparing ETFs and index funds, one other consideration needs to be discussed: capital gains.…”

Investing in mutual funds: are you paying for performance or for the ties of the manager?

“…Although MF expense ratios follow a slightly decreasing trend because of economies of scale, of the general improvements in financial sector productivity, and the competition among MF sponsors, they remain very high -from 1,730 million in 2010 to 2,053 million in 2016 -due to the investors' migration to lower-costs funds and not from fee cuts by the fund management industry. For instance, Elton et al (2019) reported evidence that (while not statistically significant), expenses have an important impact in explaining the differential performance of ETFs (and less for index mutual funds), estimated that an increase of 1% of expenses may decrease the gross return for EFTs by 27 basis points per year.…”

“…In recent studies (Papadamou and Siriopoulos 2004, Das and Rao 2013, Papadamou et al 2017 empirical evidence is provided that active management does not add significant value to the mutual fund performance and that mutual funds do not outperform benchmarks by as much as 75 basis points (Elton et al 2019). Although no longer new to the academy, revisiting this framework is particularly appropriate because we are now experiencing a re-evaluation of the mutual funds industry, supported by a growing number of empirical studies in both developed and emerging markets that have provided evidence against the superiority of active management.…”