Abusing ETFs

Utpal Bhattacharya; Benjamin Loos; Steffen Meyer; Andreas Hackethal

doi:10.1093/rof/rfw041

Review of Finance Vol. 21 No. 3 2017

Abusing ETFs

Utpal Bhattacharya¹; Benjamin Loos²; Steffen Meyer³; Andreas Hackethal⁴

¹ 1Hong Kong University of Science and Technology · ² 2University of Mannheim · ³ 3Leibniz University Hannover · ⁴ 4Goethe University Frankfurt

Abstract

Using data from a large German brokerage, we find that individuals investing in passive exchange-traded funds (ETFs) do not improve their portfolio performance, even before transaction costs. Further analysis suggests that this is because of poor ETF timing as well as poor ETF selection (relative to the choice of low-cost, well-diversified ETFs). An exploration of investor heterogeneity shows that though investors who trade more have worse ETF timing, no groups of investors benefit by using ETFs, and no groups will lose by investing in low-cost, well-diversified ETFs.

DOI: 10.1093/rof/rfw041
Volume: 21
Issue: 3
Pages: 1217-1250
Language: en
Sources: bibtex:phds-export.bib openalex crossref

Abusing ETFs

Abstract

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