Tag: Fund

Analyze tracking errors between ETF and stock market index in the last decade

5571521786922_.pic_hd.jpgSummary: In this article, under the context of Hong Kong’s Mandatory Provident Fund scheme (MPF), we find that some Exchange Traded Fund (ETF) occupy large holdings in a particular MPF fund. By calculating the tracking errors over the past ten years, the year of 2008 stands out with the highest tracking error, which corresponds with the global financial crisis. In other years with more stable stock markets, ETF performs relatively well. We also calculate returns between two ETFs and the indexes they track respectively; the results turn out to be different.

We use Python as a calculator, rely on pandas to read csv files downloaded from Yahoo Finance, and time series to present data in the form of charts.

Background

Hong Kong has a rapidly aging society. According to the Population Projections released by Census and Statistics Department, HK is expected to have a third of its population that aged 65 and above by the mid of 21st century. There is a growing concern over the issue of social security especially for the elderly, since the burden for the employed population in the future to take care of the retirees will be unbearable.

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