The Performance of European Index Funds and Exchange‐Traded Funds |
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| Authors: | David Blitz Joop Huij Laurens Swinkels |
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| Institution: | 1. Robeco Quantitative Strategies, Rotterdam, Netherlands, E‐mail: d.c.blitz@robeco.nl;2. Rotterdam School of Management and Robeco Quantitative Strategies, Rotterdam, Netherlands, E‐mail: jhuij@rsm.nl;3. Erasmus School of Economics and Robeco Quantitative Strategies, Rotterdam, Netherlands, E‐mail: lswinkels@ese.eur.nl |
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| Abstract: | European index funds and exchange‐traded funds underperform their benchmarks by 50 to 150 basis points per annum. The explanatory power of dividend withholding taxes as a determinant of this underperformance is at least on par with fund expenses. Dividend taxes also explain performance differences between funds that track different benchmarks and time variation in fund performance. Our results imply that not only fund expenses, but also dividend taxes can result in a substantial drag on mutual fund performance. |
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