סמינר במימון חשבונאות

Speaker:            Dr. Doron Israeli, IDC

Abstract

In this paper, we hypothesize and find that increased ETF ownership is accompanied by a decline in the pricing informativeness of the underlying component securities. Consistent with

predictions from noisy rational expectations models with costly information, we first demonstrate that an increase in ETF ownership is associated with higher trading costs (measured

as bid-ask spreads). Next, we show that an increase in ETF ownership is associated with: (1) an increase in the co-movement of firm specific returns with market and related industry returns

(“price synchronicity”); (2) a decline in the predictive power of current firm specific returns for future earnings (“future earnings response coefficients”), and (3) a decline in the number of

analysts covering the firm. Collectively, our evidence suggests increased ETF ownership can lead to lower benefits from information acquisition and a deterioration in firms’ information

environment.

The article will be available for download from the Finance-Accounting seminar website:

http://en-recanati.tau.ac.il/Finance-Accounting-Seminars2015a