“The Dark Side of ETFs” by Utpal Bhattacharya
Do ETFs, one of the most popular investment products in recent times, benefit individual investors? Using data from one of the largest brokerages in Germany, we find that individual investors do not improve their portfolio performance while using these products. As these securities make market timing easier, we investigate whether this is primarily due to bad market timing. Our answer is yes. We find that the improvement in security selection caused by the use of ETFs is frittered away by bad market timing.