The Effect of the Spider Exchange Traded Fund on the Cash Flow of Funds of S&P Index Mutual Funds

32 Pages Posted: 31 Jan 2006

See all articles by James Doran

James Doran

University of New South Wales

Vaneesha Boney

University of Denver

David R. Peterson

Florida State University - Department of Finance

Date Written: April 28, 2006

Abstract

Exchange traded funds (ETFs) mirror an existing index by holding the same component stocks and matching the weighting scheme. ETFs offer services and investment flexibility that indexed mutual funds generally do not. We expect that if ETFs offer additional benefits over index funds, such as intra-day and option trading, then certain investors should prefer ETFs, leading to a movement of investment dollars from indexed products to ETFs. We test this hypothesis by examining the flow of funds into and out of indexed mutual funds that track the S&P 500 and the ETF Spider. We find that the Spider has a significantly negative effect on the flow of funds of indexed mutual funds.

Keywords: Mutual Funds, Index Funds, ETF, SPY, Flow of Funds

JEL Classification: G11, G23

Suggested Citation

Doran, James and Boney, Vaneesha and Peterson, David R., The Effect of the Spider Exchange Traded Fund on the Cash Flow of Funds of S&P Index Mutual Funds (April 28, 2006). Available at SSRN: https://ssrn.com/abstract=879777 or http://dx.doi.org/10.2139/ssrn.879777

James Doran (Contact Author)

University of New South Wales ( email )

College Rd
Sydney, NSW 2052
Australia

Vaneesha Boney

University of Denver ( email )

2101 S University Blvd
Denver, CO 80208
United States
303-871-2299 (Phone)

David R. Peterson

Florida State University - Department of Finance ( email )

Tallahassee, FL 32306-1042
United States
850-644-8200 (Phone)
850-644-4225 (Fax)

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