Outperformance in exchange-traded fund pricing deviations: Generalized control of data snooping bias

Fearghal Kearney; Mark Cummins; Finbarr Murphy

doi:10.1016/j.finmar.2013.08.003

Outperformance in exchange-traded fund pricing deviations: Generalized control of data snooping bias

Fearghal Kearney^*, Mark Cummins, Finbarr Murphy

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

9 Citations (Scopus)

Abstract

An investigation into exchange-traded fund (ETF) outperforrnance during the period 2008-2012 is undertaken utilizing a data set of 288 U.S. traded securities. ETFs are tested for net asset value (NAV) premium, underlying index and market benchmark outperformance, with Sharpe, Treynor, and Sortino ratios employed as risk-adjusted performance measures. A key contribution is the application of an innovative generalized stepdown procedure in controlling for data snooping bias. We find that a large proportion of optimized replication and debt asset class ETFs display risk-adjusted premiums with energy and precious metals focused funds outperforming the S&P 500 market benchmark.

Original language	English
Pages (from-to)	86-109
Number of pages	24
Journal	Journal of Financial Markets
Volume	19
Early online date	16 Aug 2013
DOIs	https://doi.org/10.1016/j.finmar.2013.08.003
Publication status	Published - Jun 2014

Keywords

Exchange-traded fund
ETF performance
Multiple hypothesis testing
Data snooping bias
FALSE DISCOVERIES
MUTUAL FUNDS
ERROR RATES
PERFORMANCE
LUCK

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10.1016/j.finmar.2013.08.003

Fearghal Kearney
- F.Kearneyqub.acuk
Person: Academic

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title = "Outperformance in exchange-traded fund pricing deviations: Generalized control of data snooping bias",

abstract = "An investigation into exchange-traded fund (ETF) outperforrnance during the period 2008-2012 is undertaken utilizing a data set of 288 U.S. traded securities. ETFs are tested for net asset value (NAV) premium, underlying index and market benchmark outperformance, with Sharpe, Treynor, and Sortino ratios employed as risk-adjusted performance measures. A key contribution is the application of an innovative generalized stepdown procedure in controlling for data snooping bias. We find that a large proportion of optimized replication and debt asset class ETFs display risk-adjusted premiums with energy and precious metals focused funds outperforming the S&P 500 market benchmark. ",

keywords = "Exchange-traded fund, ETF performance, Multiple hypothesis testing, Data snooping bias, FALSE DISCOVERIES, MUTUAL FUNDS, ERROR RATES, PERFORMANCE, LUCK",

author = "Fearghal Kearney and Mark Cummins and Finbarr Murphy",

year = "2014",

month = jun,

doi = "10.1016/j.finmar.2013.08.003",

language = "English",

volume = "19",

pages = "86--109",

journal = "Journal of Financial Markets",

issn = "1386-4181",

publisher = "Elsevier B.V.",

}

TY - JOUR

T1 - Outperformance in exchange-traded fund pricing deviations: Generalized control of data snooping bias

AU - Kearney, Fearghal

AU - Cummins, Mark

AU - Murphy, Finbarr

PY - 2014/6

Y1 - 2014/6

N2 - An investigation into exchange-traded fund (ETF) outperforrnance during the period 2008-2012 is undertaken utilizing a data set of 288 U.S. traded securities. ETFs are tested for net asset value (NAV) premium, underlying index and market benchmark outperformance, with Sharpe, Treynor, and Sortino ratios employed as risk-adjusted performance measures. A key contribution is the application of an innovative generalized stepdown procedure in controlling for data snooping bias. We find that a large proportion of optimized replication and debt asset class ETFs display risk-adjusted premiums with energy and precious metals focused funds outperforming the S&P 500 market benchmark.

AB - An investigation into exchange-traded fund (ETF) outperforrnance during the period 2008-2012 is undertaken utilizing a data set of 288 U.S. traded securities. ETFs are tested for net asset value (NAV) premium, underlying index and market benchmark outperformance, with Sharpe, Treynor, and Sortino ratios employed as risk-adjusted performance measures. A key contribution is the application of an innovative generalized stepdown procedure in controlling for data snooping bias. We find that a large proportion of optimized replication and debt asset class ETFs display risk-adjusted premiums with energy and precious metals focused funds outperforming the S&P 500 market benchmark.

KW - Exchange-traded fund

KW - ETF performance

KW - Multiple hypothesis testing

KW - Data snooping bias

KW - FALSE DISCOVERIES

KW - MUTUAL FUNDS

KW - ERROR RATES

KW - PERFORMANCE

KW - LUCK

U2 - 10.1016/j.finmar.2013.08.003

DO - 10.1016/j.finmar.2013.08.003

M3 - Article

SN - 1386-4181

VL - 19

SP - 86

EP - 109

JO - Journal of Financial Markets

JF - Journal of Financial Markets

ER -

Outperformance in exchange-traded fund pricing deviations: Generalized control of data snooping bias

Abstract

Keywords

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Fearghal Kearney

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