Conventional mutual index funds versus exchange-traded funds
This paper examines the implications of substitutability of two similar investment vehicles: conventional index mutual funds and exchange-traded funds (ETFs). It seeks to explain the coexistence of these vehicle types, which offer a claim on the same underlying index return process, but have distinctly different organizational structures. This study compares aggregate fund flows into conventional open-ended index funds to those into ETFs for various underlying indexes. The study shows that conventional funds and ETFs are substitutes, but not perfect substitutes for one another. Evidence suggests that the coexistence of both instruments can be explained by a clientele effect that segregates the two vehicles into different market niches.
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References listed on IDEAS
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- Joel M. Dickson & John B. Shoven, 1994. "A Stock Index Mutual Fund Without Net Capital Gains Realizations," NBER Working Papers 4717, National Bureau of Economic Research, Inc.
- James M. Poterba & John B. Shoven, 2002.
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- James M. Poterba & John B. Shoven, 2002. "Exchange Traded Funds: A New Investment Option for Taxable Investors," NBER Working Papers 8781, National Bureau of Economic Research, Inc.
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