The Performance of Swiss Exchange Traded Funds

In this paper, we study the performance and the trading characteristics of Swiss Exchange Traded Funds. The first finding is that the percentage returns of Swiss ETFs lag the performance of the underlying indexes, while they encumber investors with greater risk in comparison to the indexes. Consequently, we demonstrate that Swiss ETFs do not follow full replication strategies in regard to the components of the benchmark portfolios. Further, we estimate a significant tracking error considering the performance of ETFs, which is attributed to the non-full replication policy, the management fees, the inherent risk of investments on ETFs, which is connected to the market frictions and time delays, especially in the cases of ETFs that track non-European benchmarks. In parallel, we ascertain that the expenses affect negatively the performance and they are straightly correlated to the risk of ETFs. We also denote that the volume of Swiss ETFs depends on the intraday price volatility, the number of the executed orders and the trading frequency of ETFs. Finally, we find that Swiss ETFs are inferior to their US counterparts in regards of percentage return, risk, replication strategy, tracking error and volume.