The real benchmark of DAX index products and the influence of information dissemination: A natural experiment

Schmidhammer, Christoph; Lobe, Sebastian; Röder, Klaus

doi:10.1057/jam.2014.13

Cited by 4 publications

(1 citation statement)

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“…A daily rolling window of annual return differences between NAV returns and DAX returns reveals that on average, costs range between 0.234% and 0.699% and considerably exceed TERs. According to Schmidhammer (2014), NAV results are of special interest for institutional investors who trade over the counter at fair values. Since private investors cannot trade over the counter, closing prices (CPs) which can be attributed to market makers are included.…”

Section: Introduction and Literature Reviewmentioning

confidence: 99%

Return Differences between DAX ETFs and the Benchmark DAX

Schmidhammer

2021

SSRN Journal

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Research questionExchange Traded Funds (ETFs) have become important products since they can be traded continuously during the day and costs of passive investment strategies are low. Annual financial statements are published by the German Federal Gazette and include relevant costs and income information of funds. However, this is not satisfactory for long-term investors since information is provided only once a year at a discrete point in time. The purpose of this paper is to continuously identify annual cost and income of passively managed products. ContributionAlthough cost and income information is not available daily, an approximation is possible due to changes in net asset values (NAVs) which represent fair values of a fund, determined each trading day. While costs lead to a decrease in NAVs relative to its benchmark, income components lead to an increase. To identify costs and income, this study compares NAV returns with benchmark returns. An analysis of long-term costs is implemented by the construction of a daily rolling window of annual return differences between ETFs and the corresponding index.The generated time series allows me to compare product specific costs and to identify relevant drivers such as returns of Germany's leading equity index (DAX) and market makers. ResultsFor the DAX index market, annual return differences considerably exceed total expense ratios as publically available cost information. Product-specific return differences are significant, however, differences between DAX ETFs and the DAX index tend to converge over time. For all DAX ETFs, return differences are significantly influenced by DAX index returns and by market maker prices. Product characteristics such as cash holdings and use of profits deliver valuable arguments to explain these findings. Nichttechnische Zusammenfassung FragestellungWichtige Erfolgsfaktoren für börsengehandelte Fonds, sogenannte Exchange Traded Funds (ETFs), sind neben dem Intraday-Handel auch die geringen Gebühren. Eine genaue Zusammensetzung von Kosten und Erträgen, die ein ETF während eines Geschäftsjahres verursacht und erwirtschaftet, wird im Bundesanzeiger veröffentlicht. Dennoch ist die Informationslage aus der Perspektive von Langzeitinvestoren nicht zufriedenstellend, da Kosten nur einmal pro Jahr stichtagsbezogen vorliegen. Ziel der Arbeit ist es, jährliche Kostenund Ertragsstrukturen passiver Indexprodukte fortlaufend zu identifizieren. Beitrag Obwohl Kosten-und Ertragspositionen nicht täglich bekannt sind, gelingt deren Identifikation implizit durch die Auswirkung auf die Höhe des täglich verfügbaren fairen Fondswerts, den Nettoinventarwert (NAV). Während Kosten den NAV reduzieren, erhöhen Erträge den fairen Fondswert. Beides wirkt sich unmittelbar auf die NAV-Rendite aus. Ein Renditevergleich zwischen ETF-Renditen und Indexrenditen lässt somit Rückschlüsse auf die aufgelaufenen Kosten und Erträge zu. Die jährlichen Renditedifferenzen werden täglich rollierend ermittelt und bilden die Basis für die Analyse. Die so generierte Datenreihe ermögl...

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Section: Introduction and Literature Reviewmentioning

confidence: 99%