What drives fund flows to index ETFs and mutual funds? A panel analysis of funds in India

S. Narend () and M. Thenmozhi ()
Additional contact information
S. Narend: Indian Institute of Technology Madras
M. Thenmozhi: Indian Institute of Technology Madras

DECISION: Official Journal of the Indian Institute of Management Calcutta, 2016, vol. 43, issue 1, No 2, 17-30

Abstract: Abstract This paper examines the performance and determinants of fund flows to index exchange traded funds (ETFs) and index mutual funds in India that track either S&P BSE SENSEX or CNX Nifty. We empirically show that index mutual funds track their underlying better than index ETFs. We further contribute to the literature using a panel regression analysis of funds and find that ETFs with lower expense ratio and large asset base attract more funds. Age of fund is not an important factor driving fund flows to ETFs, but it is the newer index mutual funds that attract more funds than the existing ones. The study provides evidence that investors neither take cognizance of the past performance nor the past returns of their benchmark returns of index mutual funds and ETFs. The study also finds that expense ratio is a major factor that attracts investments and fund managers would do well to reduce the expense ratio and the factors driving fund flows to index mutual funds vary depending on the underlying benchmark index. The findings of the study have policy implications, as they clearly identify the distinctive factors that drive fund flows to ETFs and index mutual funds.

Keywords: Mutual funds; ETFs; Tracking error; Fund flows; Panel regression (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://link.springer.com/10.1007/s40622-016-0124-6 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:decisn:v:43:y:2016:i:1:d:10.1007_s40622-016-0124-6

Ordering information: This journal article can be ordered from
http://www.springer.com/journal/40622

DOI: 10.1007/s40622-016-0124-6

Access Statistics for this article

DECISION: Official Journal of the Indian Institute of Management Calcutta is currently edited by Rajesh Babu

More articles in DECISION: Official Journal of the Indian Institute of Management Calcutta from Springer, Indian Institute of Management Calcutta
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().