Is the Tracking Error Time Varying? Evidence from Agricultural ETCs
Abstract
This study extensively analyses a recently popularized asset class, exchange-traded commodities (ETCs). We demonstrate that the tracking error of ETCs is dependent on the volatility of the underlying commodity prices but not persistent. Furthermore, we find the tracking ability of agricultural ETCs is affected by the replication method and the leverage of the ETCs. Our findings are important for academics and market regulators as they indicate the structure of an ETC and the time-varying volatility of agricultural prices matters for its tracking performance.
Keywords
Agricultural commodity market Exchange-traded commodities Markov switching regression Tracking error
Cite as
Bialkowski, J., Bohl, M. T., & Perera, D. (2022). Is the Tracking Error Time Varying? Evidence from Agricultural ETCs. Research in International Business and Finance, 63(December).Details
Publication type
Research article (journal)
Peer reviewed
Yes
Publication status
Published
Year
2022
Journal
Research in International Business and Finance
Volume
63
Issue
December
Language
English
ISSN
0275-5319
DOI