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Beta as a determinant of investor activity in sector exchange-traded funds

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  • Peltomäki, Jarkko

Abstract

This study investigates the role of beta along with an extended set of risk characteristics as determinants of ETF flow and ETF trading in sector exchange-traded funds (ETFs). The results reveal that the relation between beta and ETF trading (ETF flow) is decreasing (increasing) and U-shaped (inverse U-shaped). These findings imply, in line with the documented low-risk anomaly, that investors may perceive low-beta ETFs as less desirable alternatives than high-beta ETFs. The shape of the relation between beta and investor activity indicates that it is more important for investors to avoid low beta than to achieve high beta.

Suggested Citation

  • Peltomäki, Jarkko, 2017. "Beta as a determinant of investor activity in sector exchange-traded funds," The Quarterly Review of Economics and Finance, Elsevier, vol. 65(C), pages 137-145.
    • Handle: RePEc:eee:quaeco:v:65:y:2017:i:c:p:137-145
    DOI: 10.1016/j.qref.2016.06.006
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    More about this item

    Keywords

    Exchange-traded fund; Investor activity; Investment decisions; Beta;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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