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Cited by 678

The DOI matches its Crossref record; 63 of the 63 references it cites were found in a registry or an index.

Do ETFs Increase Volatility?

Open access
BEN‐DAVID, ITZHAK, FRANZONI, FRANCESCO, MOUSSAWI, RABIH·2018·The Journal of Finance
DOI 10.1111/jofi.12727
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Abstract

Due to their low trading costs, exchange‐traded funds (ETFs) are a potential catalyst for short‐horizon liquidity traders. The liquidity shocks can propagate to the underlying securities through the arbitrage channel, and ETFs may increase the nonfundamental volatility of the securities in their baskets. We exploit exogenous changes in index membership and find that stocks with higher ETF ownership display significantly higher volatility. ETF ownership increases the negative autocorrelation in stock prices. The increase in volatility appears to introduce undiversifiable risk in prices because stocks with high ETF ownership earn a significant risk premium of up to 56 basis points monthly.

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Citations

Cites

Show all 63 references

Research works printed but not linked: 13

  1. Amery Paul, 2015, ETF giants bet on futures for flows, Financial Times
  2. 10.1016/S0378-4266(98)00069-7 · doi:10.1016/s0378-4266(98)00069-7
  3. Evans Richard RabihMoussawi MichaelPagano andJohnSedunov 2017 ETF short interest and failures‐to‐deliver: Naked short‐selling or operational shorting?Working paper Villanova University. · doi:10.2139/ssrn.2961954
  4. Grossman Sanford Jay 1989 An analysis of the implications for stock and futures price volatility of program trading and dynamic hedging strategies NBER Working paper 2357. · doi:10.1086/296433
  5. 10.1016/0304-405X(92)90038-Y · doi:10.1016/0304-405x(92)90038-y
  6. Landier Augustin GuillaumeSimon andDavidThesmar 2015 The capacity of trading strategies Working paper HEC Paris. · doi:10.2139/ssrn.2585399
  7. 10.1016/j.finmar.2006.09.001 · doi:10.1016/j.finmar.2006.09.001
  8. Leippold Markus LujingSu andAlexanderZiegler 2015 Do index futures and ETFs affect stock return correlations?Working paper University of Zurich. · doi:10.2139/ssrn.2620955
  9. Malamud Semyon 2015 A dynamic equilibrium model of ETFs Working paper Swiss Finance Institute. · doi:10.2139/ssrn.2662433
  10. 10.1111/j.1540-6261.2007.01273.x · doi:10.1111/j.1540-6261.2007.01273.x
  11. 10.1093/rfs/4.1.17 · doi:10.1093/rfs/4.1.17
  12. 10.2307/1912279 · doi:10.2307/1912279
  13. Wurgler Jeffrey, 2011, Challenges to Business in the Twenty‐First Century

Cited by

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Metadata

Authors
BEN‐DAVID, I., FRANZONI, F., & MOUSSAWI, R.
Venue
The Journal of Finance
Publisher
Wiley
Published
2018-11-18
Volume
73
Issue
6
Pages
2471-2535
ISSN
  • 0022-1082 (ISSN-L)
  • 1540-6261
DOI
10.1111/jofi.12727
OpenAlex
W2893004677
Cited by
678
References
63
FWCI
34.48
Type
journal article
Language
en
Open access
green
Licence
onlinelibrary.wiley.com/termsAndConditions#vor (vor)

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BEN‐DAVID, I., FRANZONI, F., & MOUSSAWI, R. (2018). Do ETFs Increase Volatility? The Journal of Finance. https://doi.org/10.1111/jofi.12727

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