How Did MiFID Affect Systemic Underperformance in the European Equity Market? A Tracking Error based Approach

摘要

Using a new methodology based on the decomposition of tracking error, we show that the implementation of MiFID improved the quality of European equity markets. The latter was favorable to the European equity investors' ability to reach their investment objectives as measured by the systemic downside tracking error. In other words, after the implementation of the MiFID directive, investors were less likely to underperform due to unfavorable market characteristics. The results were statistically significant at the 95% significance level.