ETFs in European Emerging Markets: Performance, Risk and Sustainability

Over the past few decades, Exchange-Traded Funds (ETFs) have
become one of the most innovative financial instruments traded in financial
markets. The aim is to offer an overview of the ETF market in Emerging
Europe through a study on performance, risks and sustainability. The
research examines the costs, the performance of the fund over calendar year
periods (annual return), the volatility measurements (standard deviation and
Sharpe ratio), the components of modern portfolio theory (R-squared, alpha
and beta) and the sustainability measurements (Morningstar Portfolio
Corporate Sustainability Score and the Portfolio Carbon Risk Score). It is
developed through the collecting and re-elaborating of a data set of 46 ETFs
in emerging Europe published on www.morningstar.co.uk using a screener
tool. Data are collected on October 7th, 2023. The study uses an age-cohort
analysis which is a method to analyze and evaluate changes in the behavior
of a group with a common demographic feature in a given period of time. In
particular, the analysis puts in evidence the value of some parameters of the
cohort of funds in the period 2005-2022. Results of the study show that ETFs
continue to have a positive performance, resisting the negative economic and
social context and the investors’ attention to sustainable ETFs, especially in
recent years, has increased. The findings will serve as an important point of
reference for investment choices for building a profitable portfolio for the
investor. This study contributes to the current understanding of how ETFs
are developing in emerging Europe and how investments must always be
oriented towards ethical and sustainability principles.