Passive investing, active decisions: The DAX index inclusion effect

Abstract

Introduction Exchange Traded Funds (ETFs) have become pivotal instruments for both professional investors and private households. Key features such as continuous intraday trading, transparent pricing, and the low costs associated with passive investment strategies have significantly contributed to their widespread adoption, as highlighted by Ben-David et al. (2017). These attributes make ETFs particularly appealing for professional investors employing hedging and arbitrage strategies, where the emphasis is often on short-term horizons. 1

Keywords: abnormal returns, behavioral finance, index inclusion, investment strategy F37, G11, G12, G14, G15

JEL Classification: F37, G11, G12, G14, G15