%0 Journal Article %A Ananth Madhavan %A Ursula Marchioni %A Wei Li %A Daphne Yan Du %T Equity ETFs versus Index Futures: A Comparison for Fully Funded Investors %D 2014 %R 10.3905/jii.2014.5.2.066 %J The Journal of Index Investing %P 66-75 %V 5 %N 2 %X The widespread adoption of exchange traded funds (ETFs) as institutional instruments, tighter trading spreads, and lower fees mean these investment vehicles are increasingly seen by investors as a viable alternative to futures-based exposure. At the same time, the costs of maintaining a given exposure using futures contracts have increased, driven by regulation which has increased capital requirements and which restricts proprietary trading activities. This article 1) summarizes the trade-offs between the use of futures and ETFs for fully funded investors; 2) provides empirical evidence that ETFs are now, in many instances, a lower cost alternative to fully funded futures; and 3) analyses the fundamental drivers of roll mispricing, providing evidence that higher costs for futures reflects longer-run, systematic factors such as regulation that are unlikely to reverse soon.TOPICS: Exchange-traded funds and applications, futures and forward contracts, performance measurement %U https://jii.pm-research.com/content/iijindinv/5/2/66.full.pdf