The Unexpected Activeness of Passive Investors: A Worldwide Analysis of ETFs

The Review of Asset Pricing Studies, Forthcoming

90 Pages Posted: 26 Feb 2013 Last revised: 12 Dec 2018

See all articles by Si Cheng

Si Cheng

Chinese University of Hong Kong - Department of Finance

Massimo Massa

INSEAD - Finance

Hong Zhang

Tsinghua University - PBC School of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: September 30, 2018

Abstract

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

Cheng, Si and Massa, Massimo and Zhang, Hong, The Unexpected Activeness of Passive Investors: A Worldwide Analysis of ETFs (September 30, 2018). The Review of Asset Pricing Studies, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2224424 or http://dx.doi.org/10.2139/ssrn.2224424

Si Cheng

Chinese University of Hong Kong - Department of Finance ( email )

12/F, Cheng Yu Tung Building
No.12, Chak Cheung Street
Shatin, N.T.
Hong Kong

HOME PAGE: http://www.bschool.cuhk.edu.hk/index.php/faculty-staff/show-alltest?pid=496&sid=3939:Cheng-Si

Massimo Massa

INSEAD - Finance ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex
France
+33 1 6072 4481 (Phone)
+33 1 6072 4045 (Fax)

Hong Zhang (Contact Author)

Tsinghua University - PBC School of Finance ( email )

No. 43, Chengdu Road
Haidian District
Beijing 100083
China

HOME PAGE: http://eng.pbcsf.tsinghua.edu.cn/content/details167_7995_x.html

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