Today, Solactive AG published a new research paper analyzing the additional cost paid by investors in order to passively track a benchmark. The selection of an index as a benchmark has been tied to the cheap cost to reference it; however, in this research paper, Solactive AG quantifies the additional turnover costs that investors implicitly pay due to arbitrage activity - days before a transparent rebalancing takes place when many assets are tracking the index. In most cases, it turns out that the additional turnover costs can be as high as the price to track the index.
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