REVIEW OF LITERATURE
Various studies on exchange traded funds related to small and medium enterprises hadbeen conducted in foreign countries .However, in indian context ,the number is quitefew.Depending on the various issues of exchange traded funds ,the review has beendiscussed in brief as follows:
Poterba & Shoven (2002)
analysed that Exchange traded funds (ETFs) are a new varietyof mutual fund that first became available in 1993. ETFs have grown rapidly and nowhold nearly $80 billion in assets. ETFs are sometimes described as more 'tax efficient'than traditional equity mutual funds, since in recent years, some large ETFs have madesmaller distributions of realized and taxable capital gains than most mutual funds. It alsocompares the pre-tax and post-tax returns on the largest ETF, the SPDR trust that investsin the S&P500, with the returns on the largest equity index fund, the Vanguard Index500. The results suggest that between 1994 and 2000, the before- and after-tax returns onthe SPDR trust and this mutual fund were very similar. Both the after-tax and the pre-taxreturns on the fund were slightly greater than those on the ETF. These findings suggestthat ETFs offer taxable investors a method of holding broad baskets of stocks that deliver returns comparable to those of low-cost index funds.
Alexander & Barbosa (2005)
investigates the optimal short-term hedging of ExchangeTraded Fund (ETF) portfolios with index futures. Using daily data from May 2000 toDecember 2004 on the four largest passive ETFs (the Spider, the Diamond, the Cubesand the Russell iShare) and their corresponding index futures we examine theperformance of minimum variance hedges for efficient variance reduction and for investors with exponential utility. Our findings relate to daily hedging based on OLSregression, exponentially weighted moving averages and ECM-GARCH models and theutility-based performance evaluation criterion is adopted to capture an efficient reductionin skewness and kurtosis as well as the variance. The basis risk on US equity indices isnow extremely low and as a result we find no evidence that minimum variance hedgeratios outperform a naïve 1:1 futures hedge, either for individual ETFs or for portfolios of