LAUSR

PurposeThe purpose of this paper is to analyze the behavior of institutional and retail investors in S&P 500 index funds separately to determine why they behave differently.Design/methodology/approachWe analyze the relationship between net flow and past index-adjusted returns or expense ratios more extensively via panel data regressions across a broad dataset.FindingsWe find that the holding of institutional investors is, indeed, sticky. The results indicate that the net flow of institutional investors is not sensitive to past index-adjusted returns of expense ratios.Originality/valuePrior studies have attempted to explain the irrational behavior of investors in S&P 500 index funds. We attempt to show plausible reasons why they behave differently.