The unexpected and stickiness behavior of institutional investors in index funds
ISSN: 0307-4358
Article publication date: 8 September 2020
Issue publication date: 12 January 2021
Abstract
Purpose
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/approach
We analyze the relationship between net flow and past index-adjusted returns or expense ratios more extensively via panel data regressions across a broad dataset.
Findings
We 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/value
Prior 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.
Keywords
Acknowledgements
The authors thank an anonymous referee and the Editor for helpful comments and suggestions that greatly improved our paper.
Citation
Sanchez, E. and Oh, J. (2021), "The unexpected and stickiness behavior of institutional investors in index funds", Managerial Finance, Vol. 47 No. 1, pp. 4-35. https://doi.org/10.1108/MF-06-2020-0302
Publisher
:Emerald Publishing Limited
Copyright © 2020, Emerald Publishing Limited