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BUSINESS AND ECONOMICS RESEARCH JOURNAL

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Article Information
Journal: Business and Economics Research Journal
Title of Article: Tracking Ability and Pricing Efficiency of Exchange Traded Funds: Evidence from Borsa Istanbul
Author(s): Nazlı Kalfa Baş, Serra Eren Sarıoğlu
Volume: 6
Number: 1
Year: 2015
Page: 19-33
ISSN: 1309-2448
Abstract
The purpose of this study is to evaluate the performance and pricing efficiency of the exchange-traded funds (ETFs) operating in the Turkish Capital Markets. In this paper, we examine the tracking errors and pricing efficiencies of 16 ETFs during the period 2005-2013. This is the first paper that makes an investigation with covering all ETFs in Turkish Capital Markets. Using daily data, we find out that Turkish ETFs underperform their underlying indices. We use three different methods (arithmetic mean, absolute mean and quadratic tracking error) to measure the tracking errors and find that these errors are significantly different from zero. The pricing efficiencies of ETFs are computed using four different methods: premiums and discounts calculated in Turkish Liras (TL) and percentage and absolute values of these calculations. As a result of our analysis, we find that Turkish ETFs are priced closely to their net asset values and there exists no arbitrage opportunities in this context.
Keywords: Exchange traded funds, tracking error, pricing efficiency, Borsa Istanbul
JEL Classification: G12, G23

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