{"title":"Investor heterogeneity and the market for fund benchmarks: Evidence from passive ETFs","authors":"Leonard Kostovetsky , Jerold Warner","doi":"10.1016/j.jbankfin.2025.107412","DOIUrl":null,"url":null,"abstract":"<div><div>The market for passive ETFs and passive ETF benchmarks has exploded. Passive ETF sponsors get index benchmarks mainly from brand name index providers such as S&P and Russell. We show how benchmark and index provider characteristics are relevant for sponsors and different investor types. ETF benchmarks from large index providers attract more capital. Institutional flows exhibit a strong preference for brand name benchmarks, but do-it-yourself retail investor flows do not. ETFs that change benchmarks reduce their tracking error and have 7% higher flows in the subsequent three months, again driven by institutional flows.</div></div>","PeriodicalId":48460,"journal":{"name":"Journal of Banking & Finance","volume":"173 ","pages":"Article 107412"},"PeriodicalIF":3.6000,"publicationDate":"2025-02-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Banking & Finance","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S0378426625000329","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
The market for passive ETFs and passive ETF benchmarks has exploded. Passive ETF sponsors get index benchmarks mainly from brand name index providers such as S&P and Russell. We show how benchmark and index provider characteristics are relevant for sponsors and different investor types. ETF benchmarks from large index providers attract more capital. Institutional flows exhibit a strong preference for brand name benchmarks, but do-it-yourself retail investor flows do not. ETFs that change benchmarks reduce their tracking error and have 7% higher flows in the subsequent three months, again driven by institutional flows.
期刊介绍:
The Journal of Banking and Finance (JBF) publishes theoretical and empirical research papers spanning all the major research fields in finance and banking. The aim of the Journal of Banking and Finance is to provide an outlet for the increasing flow of scholarly research concerning financial institutions and the money and capital markets within which they function. The Journal''s emphasis is on theoretical developments and their implementation, empirical, applied, and policy-oriented research in banking and other domestic and international financial institutions and markets. The Journal''s purpose is to improve communications between, and within, the academic and other research communities and policymakers and operational decision makers at financial institutions - private and public, national and international, and their regulators. The Journal is one of the largest Finance journals, with approximately 1500 new submissions per year, mainly in the following areas: Asset Management; Asset Pricing; Banking (Efficiency, Regulation, Risk Management, Solvency); Behavioural Finance; Capital Structure; Corporate Finance; Corporate Governance; Derivative Pricing and Hedging; Distribution Forecasting with Financial Applications; Entrepreneurial Finance; Empirical Finance; Financial Economics; Financial Markets (Alternative, Bonds, Currency, Commodity, Derivatives, Equity, Energy, Real Estate); FinTech; Fund Management; General Equilibrium Models; High-Frequency Trading; Intermediation; International Finance; Hedge Funds; Investments; Liquidity; Market Efficiency; Market Microstructure; Mergers and Acquisitions; Networks; Performance Analysis; Political Risk; Portfolio Optimization; Regulation of Financial Markets and Institutions; Risk Management and Analysis; Systemic Risk; Term Structure Models; Venture Capital.