The Unexpected Activeness of Passive Investors: A Worldwide Analysis of ETFs
The Review of Asset Pricing Studies, Vol. 9, No. 2, 2019
90 Pages Posted: 26 Feb 2013 Last revised: 23 Feb 2021
Date Written: September 30, 2018
The global ETF industry provides more complicated investment vehicles than low-cost index trackers. Instead, we find that the real investments of ETFs may deviate from their benchmarks to leverage informational advantages (which leads to a surprising stock-selection ability) and to help affiliated OEFs through cross-trading. These effects are more prevalent in ETFs domiciled in Europe. Moreover, ETF flows seem to respond to additional risk. These results have important normative implications for consumer protection and financial stability.
Keywords: ETFs, Subsidization, Banks, Shadow Banking, Distress
JEL Classification: G20
Suggested Citation: Suggested Citation