Does Holding Passive ETFs Change Retail Investors’ Trading Behavior for the Better?

We use random matching to study the trading behaviors of retail investors who hold passive exchange traded funds invested in stocks (P-ETFs). Using both trading records and survey data to control for all the key investor characteristics, we find strong evidence that retail investors trade differently when they hold P-ETFs. They have a higher portfolio size, a lower turnover, and keep their assets for a longer period of time than the control group of retail investors who hold individual stocks only. P-ETF retail investors are also better protected against stock gambling and those among them who follow a core-satellite approach are least likely to hold lottery-like stocks.

Keywords: ETFs, Stocks, Retail Investors, Passive Investing, Gambling Behavior

JEL Classification: G11, G40, G53

Suggested Citation: Suggested Citation

D'Hondt, Catherine and Elhichou, Younes and Petitjean, Mikael, Does Holding Passive ETFs Change Retail Investors’ Trading Behavior for the Better? (February 10, 2021). Available at SSRN: https://ssrn.com/abstract=3783738 or http://dx.doi.org/10.2139/ssrn.3783738