Random walk of international exchange-traded funds

Abstract

Asynchronous trading hours between Exchange-Traded Funds (ETFs) and their benchmarks markets not only make it difficult to apply full replication strategy but they also make the creation/redemption process ineffective and consequently distress the performance of the international ETFs. Despite the exponential growth of ETF industry in general and international ETFs in particular, the performance of international ETFs is under-researched. Therefore, this study evaluates the performance of the US-listed international ETFs by analysing the return and volatility, tracking ability and pricing efficiency. The study findings are equally useful to the investors and practitioners interested to understand the various aspects of the performance of international ETFs.