RT Journal Article
SR Electronic
T1 The Effect of the Spider Exchange Traded Fund on the Demand for S&P Index Mutual Funds
JF ETFs and Indexing
FD Institutional Investor Journals
SP 61
OP 74
VO 2007
IS 1
A1 Vaneesha R. Boney
A1 James S. Doran
A1 David R. Peterson
YR 2007
UL http://guides.pm-research.com/content/2007/1/61.abstract
AB 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 shift in demand 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 net creation and redemption levels for the ETF Spider. We find that the demand for the Spider has a significantly negative effect on the demand and, thus, the flow of funds of indexed mutual funds. Moreover, the lowest cost mutual fund provider seems to be exempt from this relationship.