Is there a dark side to exchange traded funds? An information perspective
We examine whether an increase in ETF ownership is accompanied by a decline in pricing efficiency for the underlying component securities. Our tests show an increase in ETF ownership is associated with (1) higher trading costs (bid-ask spreads and market liquidity), (2) an increase in “stock return...
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| Veröffentlicht in: | Review of accounting studies 2017-09, Vol.22 (3), p.1048-1083 |
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| creator | Israeli, Doron Lee, Charles M. C. Sridharan, Suhas A. |
| description | We examine whether an increase in ETF ownership is accompanied by a decline in pricing efficiency for the underlying component securities. Our tests show an increase in ETF ownership is associated with (1) higher trading costs (bid-ask spreads and market liquidity), (2) an increase in “stock return synchronicity,” (3) a decline in “future earnings response coefficients,” and (4) a decline in the number of analysts covering the firm. Collectively, our findings support the view that increased ETF ownership can lead to higher trading costs and lower benefits from information acquisition. This combination results in less informative security prices for the underlying firms. |
| doi_str_mv | 10.1007/s11142-017-9400-8 |
| format | Article |
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| source | Springer Nature - Complete Springer Journals; EBSCOhost Business Source Complete |
| subjects | Accounting/Auditing Business and Management Corporate Finance Costs Exchange traded funds Public Finance Securities markets Stock prices Studies |
| title | Is there a dark side to exchange traded funds? An information perspective |
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