The Real Effects of Exchange-Traded Funds

70 Pages Posted: 24 Feb 2018 Last revised: 26 Jan 2020

See all articles by Constantinos Antoniou

Constantinos Antoniou

University of Warwick - Warwick Business School

Frank Weikai Li

Singapore Management University - Lee Kong Chian School of Business

Xuewen Liu

University of Hong Kong (HKU) - Finance Area, Faculty of Business and Economics

Avanidhar Subrahmanyam

University of California, Los Angeles (UCLA) - Finance Area; Institute of Global Finance, UNSW Business School; Financial Research Network (FIRN)

Chengzhu Sun

Hong Kong University of Science & Technology (HKUST)

Date Written: January 1, 2020

Abstract

How do exchange-traded funds (ETFs) influence real investment policies? We find that ETF ownership is associated with an increase in the sensitivity of real investment to Tobin's q. This implies a managerial learning channel, wherein higher ETF ownership increases price informativeness about systematic shocks. Supporting this pathway, higher ETF ownership is associated with higher predictability of future systematic earnings from stock prices, and reduced responsive of investment to stock prices of peers. Overall, the evidence is inconsistent with ETFs exerting a negative effect on real efficiency; the opposite hypothesis receives more support in the data.

Keywords: ETFs, Real Efficiency, Informational Efficiency, Managerial Learning

JEL Classification: G14, G23, G31

Suggested Citation

Antoniou, Constantinos and Li, Frank Weikai and Liu, Xuewen and Subrahmanyam, Avanidhar and Sun, Chengzhu, The Real Effects of Exchange-Traded Funds (January 1, 2020). Available at SSRN: https://ssrn.com/abstract=3129369 or http://dx.doi.org/10.2139/ssrn.3129369

Constantinos Antoniou

University of Warwick - Warwick Business School ( email )

Coventry CV4 7AL
United Kingdom

Frank Weikai Li

Singapore Management University - Lee Kong Chian School of Business ( email )

469 Bukit Timah Road
Singapore 912409
Singapore

Xuewen Liu

University of Hong Kong (HKU) - Finance Area, Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

HOME PAGE: http://web.hku.hk/~xuewenl/

Avanidhar Subrahmanyam (Contact Author)

University of California, Los Angeles (UCLA) - Finance Area ( email )

Los Angeles, CA 90095-1481
United States
310-825-5355 (Phone)
310-206-5455 (Fax)

Institute of Global Finance, UNSW Business School

Sydney, NSW 2052
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Chengzhu Sun

Hong Kong University of Science & Technology (HKUST) ( email )

Clearwater Bay
Kowloon, 999999
Hong Kong

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