Exchange-Traded Funds and Real Investment

Review of Financial Studies, forthcoming

91 Pages Posted: 24 Feb 2018 Last revised: 16 May 2022

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

The Hong Kong Polytechnic University

Date Written: January 1, 2020

Abstract

We investigate the link between exchange-traded funds and real investment. Cross-sectionally, higher ETF ownership is associated with an increased sensitivity of real investment to Tobin’s q, and a heightened ability of stock returns to forecast future earnings. Inclusion of stocks in industry ETFs enhances investment-q sensitivity, and implies greater incorporation of earnings information into prices prior to public releases. Greater non-market ETF ownership leads to increased (reduced) reliance of real investment on own (peers’) stock prices. Overall, the evidence is consistent with ETFs exerting a positive effect on real investment efficiency via greater flows of information.

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, Exchange-Traded Funds and Real Investment (January 1, 2020). Review of Financial Studies, forthcoming, 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

The Hong Kong Polytechnic University ( email )

M849, 8/F Li Ka Shing Tower
Hung Hom
Kowloon, 999999
Hong Kong

HOME PAGE: http://https://af.polyu.edu.hk/people/academic-staff/dr-chengzhu-sun/

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
948
Abstract Views
4,605
Rank
37,304
PlumX Metrics