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Blaming or praising passive ETFs?

Author

Listed:
  • D’Hondt, Catherine

    (Université catholique de Louvain, LIDAM/LFIN, Belgium)

  • Elhichou Elmaya, Younes

    (Université catholique de Louvain, LIDAM/LFIN, Belgium)

  • Petitjean, Mikael

    (Université catholique de Louvain, LIDAM/LFIN, Belgium)

Abstract

We use random matching to study the trading behaviors of retail investors who hold passive exchange traded funds invested in stocks (P-ETFs). Using both trading records and survey data to control for all the key investor characteristics, we find strong evidence that retail investors trade differently when they hold P-ETFs. They have a higher portfolio size, a lower turnover, and keep their assets for a longer period of time than the control group of retail investors who hold individual stocks only. P-ETF retail investors are also better protected against stock gambling and those among them who follow a core-satellite approach are least likely to hold lottery-like stocks.

Suggested Citation

  • D’Hondt, Catherine & Elhichou Elmaya, Younes & Petitjean, Mikael, 2021. "Blaming or praising passive ETFs?," LIDAM Discussion Papers LFIN 2021008, Université catholique de Louvain, Louvain Finance (LFIN).
    • Handle: RePEc:ajf:louvlf:2021008
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    References listed on IDEAS

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    More about this item

    Keywords

    ETFs; Stocks; Retail Investors; Passive Investing; Gambling Behavior;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G40 - Financial Economics - - Behavioral Finance - - - General
    • G53 - Financial Economics - - Household Finance - - - Financial Literacy

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