PT - JOURNAL ARTICLE AU - Srinidhi Kanuri AU - Davinder Malhotra AU - James Malm TI - Evaluating the Performance and Diversification Benefits of Emerging-Market Exchange-Traded Funds AID - 10.3905/jwm.2018.20.4.085 DP - 2018 Jan 31 TA - The Journal of Wealth Management PG - 85--90 VI - 20 IP - 4 4099 - https://pm-research.com/content/20/4/85.short 4100 - https://pm-research.com/content/20/4/85.full AB - This study evaluates the performance and diversification benefits for U.S. investors of emerging-market exchange-traded funds (ETFs) since their inception in January 2003 through June 2015 by comparing their absolute and risk-adjusted performance with the iShares Core S&P 500 ETF (IVV). The authors find that the emerging-market ETF portfolio has very low correlations with IVV during the period of the study. Emerging-market ETF portfolios delivered better absolute performance (returns and wealth) but also had much higher risk (standard deviation of returns). However, the risk-adjusted performance (Sharpe and Omega ratios) of IVV was better than that of the emerging-market ETF portfolio. They also look at the effect of adding some emerging-market ETFs to IVV during the period of study. The authors find that adding some emerging-market ETFs to IVV leads to higher absolute returns, better risk-adjusted performance (Sharpe and Omega ratios), higher cumulative returns, and increased wealth for U.S. investors. Results are statistically significant at 1% in all cases. Therefore, U.S. investors should add some emerging-market ETFs to their domestic allocation based on their risk tolerance for better performance (absolute and risk-adjusted).TOPICS: Exchange-traded funds and applications, emerging, portfolio construction, performance measurement