Abstract. With the development of financial markets, there is also immediate expansion of fund industry, which is a representative issue of collective investment. The purpose of index funds is to replicate returns and risk of underling index to the largest possible extent, with tracking error being one of the most monitored performance indicator of these passively managed funds. The aim of this paper is to describe several perspectives concerning indexing, index funds and exchange-traded funds, to explain the issue of tracking error with its examination and subsequent comparison of such funds provided by leading investment management companies with regard to different methods used for its evaluation. Our research shows that the decisive factor for occurrence of copy deviation is fund size and fund´s stock consolidation. In addition, performance differences between exchange-traded fund and its benchmark tend to show the signs of seasonality in the sense of increasing in the last months of a year.
The second half of the 20th century brought breakthroughs in the field of science and technology, which significantly affected not only the growth of labour productivity and economic growth, but also brought changes in industrial structures and changes in share of individual industries in GDP. Even more strikingly, these changes have been reflected in the stock market, with leading companies from the field of information technology, which affect the flow and processing of information in revolutionary way. The onset of so-called internet economy at the beginning of the 1990s significantly changes also the structure of stock indices. Business services lure investors particularly into the area of financial services, which also show high degree of appreciation of the investment. New phenomenon nowadays is and expected changes in industrial structures not only in GDP, but also in the structure of stock markets will be brought by new phase of industrial revolution Industry 4.0. The aim of this paper is to quantify and analyse the current state and position of individual industries in the structure of GDP and stock indices and to outline new tendencies and to predict changes in these indicators with regards to the realization of 4th phase of industrial revolution.
A high liquidity, low expense ratio and the possibility to conduct arbitrage allow exchange-traded funds (ETFs) to be used for short sales. Bearish investors can also buy inverse ETFs. This paper aims to outline two investment approaches for bearish ETF investors and the differences between these two approaches; it also aims to examine the relationship between price and an indicator of volume and evaluate the final positions in selected ETFs in selected periods. Short ETFs dominate in simplicity, flexibility, paying out dividends and especially in the limited size of the loss. On the other hand, their structure, which demands daily rebalancing, causes substantial deviation from the benchmark in the long-term and leads to a higher expense ratio, and lower liquidity increases bid-ask spreads. Negative aspects of ETF short selling lie in unlimited loss, high borrowing costs, the need for margin accounts, variability of loan fees and the possibility of a transaction recall by the lender. On the contrary, margin operations enable potentially higher appreciation of capital by generating rebate rates. Our results show that with the decrease in value of the most used ETFs, short interest is growing for those funds where there is a very strong negative correlation implying hedging tendencies. Short selling proved to be a more advantageous strategy in the observed period of market downturn, as well as in 2011–2017, due to negative returns, however, by applying margin trading inverse ETFs turned out to make less losses. Sector-oriented inverse ETFs are the exception, where the largest differences between these two strategies are recorded. However, the final conclusion of the suitability of one of the analyzed strategies depends on the market volatility and the direction of the market itself.
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