The purpose of this thesis is to conduct a high frequency study of the pricing behavior and performance of an emerging market exchange traded fund relative to its benchmark index1. The thesis uses a high frequency intraday data2 set of the international EWZ ETF and its benchmark the MSCI Brazil making this high frequency analysis the first on an emerging market ETF. In testing the pricing behavior, the thesis first examines the price deviation of the ETF from its benchmark index. Second pricing behavior is analyzed using cointergration analysis and a Vector Error Correction Model (VECM) between the ETF and the index intraday movements as well as a Granger Causality test for robsutness. In testing performance differences between the ETF and index, a performance is measured and compared using Sharpe Ratio and persistence and the tracking error of the ETF are measured analysis is also conducted. Results showed that the prices of the index are higher on average that those of the ETF on both daily and intraday basis. Moreover, it was shown in the results that the ETF outperforms the index on intraday basis but the index outperforms the on daily basis. Also, the results displayed that there is an average daily tracking error on annual basis and that this error is persistent with a 0.12% rate. Furthermore, it was concluded that on intraday basis both the ETF and the index move to close the gap if a price deviation exists with a rate of 16.3% and 83.7% respectively, while on the other hand, on daily basis the results show that ETF doesn't affect the index at all Keywords: Exchange Traded Funds, ETFs, price deviation, performance persistence, tracking error, tracking ability, co-integration, international.
MS in Finance
Committee Member 1
Committee Member 2
The author retains all rights with regard to copyright. The author certifies that written permission from the owner(s) of third-party copyrighted matter included in the thesis, dissertation, paper, or record of study has been obtained. The author further certifies that IRB approval has been obtained for this thesis, or that IRB approval is not necessary for this thesis. Insofar as this thesis, dissertation, paper, or record of study is an educational record as defined in the Family Educational Rights and Privacy Act (FERPA) (20 USC 1232g), the author has granted consent to disclosure of it to anyone who requests a copy.
Institutional Review Board (IRB) Approval
Not necessary for this item
(2017).High frequency analysis of the EWZ ETF [Master's Thesis, the American University in Cairo]. AUC Knowledge Fountain.
Ragab, Nada. High frequency analysis of the EWZ ETF. 2017. American University in Cairo, Master's Thesis. AUC Knowledge Fountain.