From stocks to ETFs: explaining retail investors' migration behavior

Abstract

Purpose

Evidence suggests that retail investors who invest in individual stocks are, in the long run, largely outperformed by market indexes such as the MSCI World. While some turn to exchange traded funds (ETFs) to invest in such market indexes, few migrate completely to ETFs. This study aims to shed light on the rationale behind retail investors' partial and complete migration from stocks to ETFs.

Design/methodology/approach

Drawing from the pull-push-mooring framework, a qualitative study (N = 21) informs a quantitative study (N = 282) by following established mixed methods guidelines. This study develops propositions for partial and complete migration intention to ETFs.

Findings

Results reveal that perceived investment possibilities, perceived risk reduction, perceived administrative effort, perceived expensiveness and monetary loss costs influence the migration from stocks to ETFs. This study shows that three configurations of perceptions result in partial migration intention and one configuration results in complete migration intention.

Originality/value

This study explains why some migrate partially from stocks to ETFs and others migrate completely. Findings show that both migration behaviors are subject to the same perceptions, but the configurations that form the behaviors are different. While only some identified perceptions must be present for a partial migration, all of them must be present for a complete migration, as it requires retail investors to sell their stocks and accept the costs incurred to invest in ETFs instead.

Citation

Meier, M. and Maier, C. (2023), "From stocks to ETFs: explaining retail investors' migration behavior", Internet Research, Vol. 33 No. 4, pp. 1249-1275. https://doi.org/10.1108/INTR-09-2021-0695