Abstract
This study presents the first formal analysis of the clientele trading characteristics of exchange-traded funds (ETFs) vis-a-vis their underlying equities. Overall, mean trade size is much higher for ETFs than for equities. In addition, contrary to marketing-generated a priori expectations, ETF traders are dramatically underrepresented in the case of the smallest investor clienteles and dramatically overrepresented in the case of the largest clienteles. Indeed, the percentage of 10,000 share and up block traders for the ETFs exceeds that of the underlying equities by factors of from 2.5 to 4.0 times. Finally, intraday patterns of trade timing suggest that ETF trades follow the U-shaped curve of McInish and Wood [1992] and that there are few differences between stock and ETF trade patterns either in aggregate or across differing investor clienteles.
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