All Are Not Created Equal: An Exploration of ETF Asset Growth

Abstract

Exchange-traded funds (ETFs) are unique pooled investments. They are traded on a stock exchange, and their shares can be created and redeemed accordingly to demand. Unlike mutual funds, ETFs appeal to both retail and institutional investors. In this article, we examine the drivers of ETF asset growth. In particular, we compare the growth path of ETFs that track an identical underlying index. Our results suggest that individual ETF asset growth is driven not only by asset returns but also by a host of financial/technical and investor attention variables. Importantly, the extent of the influence of specific drivers is conditional on an ETF’s growth stage and clientele. We also explore measurable factors that may influence investor attention.