Innovation and Informed Trading: Evidence from Industry ETFs

• 成果类型: Article
• 署名作者: Huang, Shiyang; O'Hara, Maureen; Zhong, Zhuo
• 署名单位: University of Hong Kong; Cornell University; University of Melbourne
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhaa077
• 发表日期: 2021
• 页码: 1280
• 关键词: Financial innovation; arbitrage; return; funds

摘要

We empirically examine the impact of industry exchange-traded funds (IETFs) on informed trading and market efficiency. We find that IETF short interest spikes simultaneously with hedge fund holdings on the member stock before positive earnings surprises, reflecting long-the-stock/short-the-ETF activity. This pattern is stronger among stocks with high industry risk exposure. A difference-in-difference analysis on the ETF inception event shows that IETFs reduce post-earnings-announcement drift more among stocks with high industry risk exposure, suggesting that IETFs improve market efficiency. We also find that the short interest ratio of IETFs positively predicts IETF returns, consistent with the hedging role of IETFs.