ETFs vs. Index Funds in the Greek Market
before and during the Crisis

Abstract

This article is focused on several issues surrounding the performance of Greek index funds. In particular, it examines the return and risk of funds over the period 2008-201d, along with their ability to replicate the performance of benchmark. It also assesses the effects of the global financial crisis as well as the Greek economic crisis on the performance and volatility of funds. The results indicate that the funds experienced great losses over the study period, while the Greek equities market was very turbulent. The influence of the global and local economic crises is found to be significant. In particular, the Greek funds had huge losses after the bankruptcy of Lehman Brothers and after the announcement of the first agreement with the EU and IMF on the rescue of Greece. On the other hand, the decision of Eurogroup on November 26, 2012, for the financing of Greek debt positively influenced the risk and return of Greek funds. The performance of index funds is found to be superior to that of ETFs, but there is no material difference between their risk. Finally, we demonstrate that the funds sufficiently replicate their benchmark even though modest tracking errors occur.

TOPICS: Exchange-traded funds and applications, developed, financial crises and financial market history