Competition for Attention in the ETF Space

Itzhak Ben-David, Francesco Franzoni, Byungwook Kim and Rabih Moussawi

No 28369, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The interplay between investors' demand and providers' incentives has shaped the evolution of exchange-traded funds (ETFs). While early ETFs invest in broad-based indexes and therefore offered diversification at low cost, later products track niche port- folios and charge high fees. Strikingly, over their first five years, specialized ETFs lose about 30% in risk-adjusted terms. This underperformance cannot be explained by high fees or hedging demand. Rather, it is driven by the overvaluation of the underlying stocks at the time of the launch. Our results are consistent with providers catering to investors' extrapolative beliefs by issuing specialized ETFs that track attention- grabbing themes.

JEL-codes: G12 G14 G15 (search for similar items in EconPapers)
Date: 2021-01
New Economics Papers: this item is included in nep-fmk
Note: AP CF
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Citations: View citations in EconPapers (6)

Published as Itzhak Ben-David & Francesco Franzoni & Byungwook Kim & Rabih Moussawi & Ralph Koijen, 2023. "Competition for Attention in the ETF Space," The Review of Financial Studies, vol 36(3), pages 987-1042.

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Related works:
Journal Article: Competition for Attention in the ETF Space (2023)
Working Paper: Competition for Attention in the ETF Space (2021)
Working Paper: Competition for Attention in the ETF Space (2021)
Working Paper: Competition for Attention in the ETF Space (2021)
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