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 journalArticle

5 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 languageEnglish
Pages (from-to)86-109
Number of pages24
JournalJournal of Financial Markets
Volume19
Early online date16 Aug 2013
DOIs
Publication statusPublished - 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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