Institutional Investor Preferences: Evidence from Exchange-Traded Notes

41 Pages Posted: 10 Aug 2017

See all articles by David A. Rakowski

David A. Rakowski

University of Texas at Arlington

Sara Shirley

Middle Tennessee State University

Jeffrey Stark

Middle Tennessee State University

Date Written: August 9, 2017

Abstract

We use the introduction of exchange-traded notes (ETNs) as a way to examine which characteristics of institutional investors’ preferences are generalizable across new types of security design, as well as to infer which of the novel characteristics of ETN are in demand from institutions. As with equities, we find that institutions are drawn to ETNs with higher levels of capitalization, liquidity, and risk. Unlike in equity markets, we find no association between past returns, representing either momentum of contrarian patterns, and institutional preferences for ETNs. Instead, institutions engage in contrarian behavior by chasing underpriced ETNs. Lastly, we find changes in institutional holdings to be positively associated with future ETN returns. Overall, our results suggest that preferences of institutional investors are robust across security types, but that inferences made only with regard to equities can be incomplete.

Keywords: Exchange Traded Notes (ETNs), Institutional investors, security design

JEL Classification: G100, G190, G230

Suggested Citation

Rakowski, David A. and Shirley, Sara and Stark, Jeffrey, Institutional Investor Preferences: Evidence from Exchange-Traded Notes (August 9, 2017). Available at SSRN: https://ssrn.com/abstract=3015756 or http://dx.doi.org/10.2139/ssrn.3015756

David A. Rakowski (Contact Author)

University of Texas at Arlington ( email )

Box 19449 UTA
Arlington, TX 76019
United States

Sara Shirley

Middle Tennessee State University ( email )

Murfreesboro, TN 37132
United States

Jeffrey Stark

Middle Tennessee State University ( email )

Murfreesboro, TN
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
39
Abstract Views
398
PlumX Metrics