Diversification or distortion? The role of ETFs in retail investor portfolios and performance
Year: 2026
Type: article
Study design: Observational Study
Abstract: We examine how ETF adoption affects retail investor performance using a comprehensive panel of 524,181 Finnish investors tracked from 2007 to 2022. ETF adopters tend to be older, predominantly male, and more active, holding smaller but better-diversified portfolios. Importantly, first-time use of ETFs yields statistically significant improvements in risk-adjusted returns. ETF users also demonstrate greater portfolio resilience during financial crises. Our findings confirm that ETFs serve as effective tools for enhancing performance and managing risk for retail investors.
Source: Journal of Financial Stability
Authors: Zheng Wu, P. Joakim Westerholm, Zhen Wang
Institution: The University of Sydney
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: hybrid
Estimated APC paid: $3,470
OpenAlex ID: W7130306000