Abstract
We use random matching to study the trading behaviors of retail investors who hold passive exchange traded funds invested in stocks (P-ETFs). Using both trading records and survey data to control for all the key investor characteristics, we find strong evidence that retail investors trade differently when they hold P-ETFs. They have a higher portfolio size, a lower turnover, and keep their assets for a longer period of time than the control group of retail investors who hold individual stocks only. P-ETF retail investors are also better protected against stock gambling and those among them who follow a core-satellite approach are least likely to hold lottery-like stocks.
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