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The unexpected and stickiness behavior of institutional investors in index funds

The unexpected and stickiness behavior of institutional investors in index funds The purpose of this paper is to analyze the behavior of institutional and retail investors in S&P 500 index funds separately to determine why they behave differently.Design/methodology/approachWe analyze the relationship between net flow and past index-adjusted returns or expense ratios more extensively via panel data regressions across a broad dataset.FindingsWe find that the holding of institutional investors is, indeed, sticky. The results indicate that the net flow of institutional investors is not sensitive to past index-adjusted returns of expense ratios.Originality/valuePrior studies have attempted to explain the irrational behavior of investors in S&P 500 index funds. We attempt to show plausible reasons why they behave differently. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Managerial Finance Emerald Publishing

The unexpected and stickiness behavior of institutional investors in index funds

Managerial Finance , Volume 47 (1): 32 – Jan 12, 2021

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References (31)

Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
0307-4358
DOI
10.1108/mf-06-2020-0302
Publisher site
See Article on Publisher Site

Abstract

The purpose of this paper is to analyze the behavior of institutional and retail investors in S&P 500 index funds separately to determine why they behave differently.Design/methodology/approachWe analyze the relationship between net flow and past index-adjusted returns or expense ratios more extensively via panel data regressions across a broad dataset.FindingsWe find that the holding of institutional investors is, indeed, sticky. The results indicate that the net flow of institutional investors is not sensitive to past index-adjusted returns of expense ratios.Originality/valuePrior studies have attempted to explain the irrational behavior of investors in S&P 500 index funds. We attempt to show plausible reasons why they behave differently.

Journal

Managerial FinanceEmerald Publishing

Published: Jan 12, 2021

Keywords: Stickiness; Index fund; Institutional fund; Unexpected behavior

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