Index funds or ETFs

the case of the S&P 500 for individual investors

Authors

  • Larry J. Prather Department of Accounting & Finance, Southeastern Oklahoma State University
  • Ting-Heng Chu Department of Economics and Finance, East Tennessee State University
  • M. Imtiaz Mazumder School of Business, SUNY Institute of Technology
  • John C. Topuz Department of Accounting & Finance, Southeastern Oklahoma State University

DOI:

https://doi.org/10.61190/fsr.v18i3.4947

Keywords:

ETFs, S&P 500, Fees and expenses, Standard and Poor's depository receipts

Abstract

We investigate alternative S&P 500 indexing strategies for individual investors using S&P 500 index funds and the Standard and Poor's depository receipt (SPDR). This investigation is important becuase while SPDRs have lower advertised annual expenses, investors in SPDRs face bid-ask spreads and commissions. We computer average spreads of SPDRs using transaction-by-transaction data, present a model to illustrate how investors can compare alternative index investments, and illustrate the results under several scenarios. We conclude by comparing risk-adjusted returns of the alternatives to ensure that undisclosed trading costs do not alter the choice.

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Published

2009-09-30

Issue

Vol. 18 No. 3 (2009): FSR Fall 2009

Section

New Original Submission

License

Copyright (c) 2009 Academy of Financial Services

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How to Cite

Index funds or ETFs: the case of the S&P 500 for individual investors. (2009). Financial Services Review, 18(3), 213-230. https://doi.org/10.61190/fsr.v18i3.4947