A Research On Tracking Error Of Exchange Traded Fund

In our country since 2004 issued the first exchange traded fund has gone through 12 years, with the continuous improvement of the capital market, the growing popularity of investment philosophy, an exchange traded fund in multiple aspects of total assets, product category and management system have great development. Using passive investment strategy to track the underlying index exchange traded fund, due to the influence of many factors, resulting in index funds tracking the target will produce inevitable tracking error, and fund managers through the fund tracking error control in a reasonable range method to evaluate the performance of the fund and to assess the risk. Therefore, the tracking error is an important index to measure the operating conditions of the fund. At present, many calculation methods of tracking error of the fund, different calculation methods have their respective advantages and disadvantages of different methods, calculation results can be a comprehensive measure of tracking error. In addition to understand the main reasons and affecting factors of tracking errors is the key to optimize the tracking error.In this paper, through the discussion of the domestic and foreign development of the transaction type open index fund, we found that there are two problems in China’s ETF, the first, ETF in the Chinese fund market share is very small, there is a great space for development. Second, wide fund accounts for the largest proportion of ETF, other types of ETF to be developed. So the research on the tracking error of the fund has great significance to the development of ETF in China. In addition, this paper selects ten sample funds in the observation period from March 2013 to March 2016 to measure the size of the tracking error, through the multiple linear regression model analysis to study the main influence factors of tracking error.Draw the following conclusion through the research: first, calculates the tracking error and the standard deviation deviation degree method and regression analysis method, the calculation results are close to each other, and mean absolute deviation method to calculate the results than the results of the above two methods to small. Second, this paper by means of linear regression model residuals outlier analysis, it is found that Shanghai 50 ETF on the ex dividend day have large tracking error, tracking error in the size and the cycle has the very big relations. Each year the second quarter fund tracking error volatility significantly. Third, the main factors affecting the tracking error with the purchase and redemption of fund dividends, share, fund cost and other factors.