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Article: Innovation and Informed Trading: Evidence from Industry ETFs

TitleInnovation and Informed Trading: Evidence from Industry ETFs
Authors
KeywordsG12 - Asset Pricing
Trading volume
Bond Interest Rates
G14 - Information and Market Efficiency
Event Studies
Issue Date2020
PublisherOxford University Press. The Journal's web site is located at http://rfs.oxfordjournals.org/
Citation
The Review of Financial Studies, 2020, Epub 2020-07-07 How to Cite?
AbstractWe 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.
Persistent Identifierhttp://hdl.handle.net/10722/284756
ISSN
2023 Impact Factor: 6.8
2023 SCImago Journal Rankings: 17.654
ISI Accession Number ID

 

DC FieldValueLanguage
dc.contributor.authorHuang, S-
dc.contributor.authorO’Hara, M-
dc.contributor.authorZhong, Z-
dc.date.accessioned2020-08-07T09:02:13Z-
dc.date.available2020-08-07T09:02:13Z-
dc.date.issued2020-
dc.identifier.citationThe Review of Financial Studies, 2020, Epub 2020-07-07-
dc.identifier.issn0893-9454-
dc.identifier.urihttp://hdl.handle.net/10722/284756-
dc.description.abstractWe 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.-
dc.languageeng-
dc.publisherOxford University Press. The Journal's web site is located at http://rfs.oxfordjournals.org/-
dc.relation.ispartofThe Review of Financial Studies-
dc.rightsPre-print: Journal Title] ©: [year] [owner as specified on the article] Published by Oxford University Press [on behalf of xxxxxx]. All rights reserved. Pre-print (Once an article is published, preprint notice should be amended to): This is an electronic version of an article published in [include the complete citation information for the final version of the Article as published in the print edition of the Journal.] Post-print: This is a pre-copy-editing, author-produced PDF of an article accepted for publication in [insert journal title] following peer review. The definitive publisher-authenticated version [insert complete citation information here] is available online at: xxxxxxx [insert URL that the author will receive upon publication here].-
dc.subjectG12 - Asset Pricing-
dc.subjectTrading volume-
dc.subjectBond Interest Rates-
dc.subjectG14 - Information and Market Efficiency-
dc.subjectEvent Studies-
dc.titleInnovation and Informed Trading: Evidence from Industry ETFs-
dc.typeArticle-
dc.identifier.emailHuang, S: huangsy@hku.hk-
dc.identifier.authorityHuang, S=rp02052-
dc.description.naturelink_to_subscribed_fulltext-
dc.identifier.doi10.1093/rfs/hhaa077-
dc.identifier.scopuseid_2-s2.0-85104283207-
dc.identifier.hkuros311559-
dc.identifier.volumeEpub 2020-07-07-
dc.identifier.isiWOS:000649395200005-
dc.publisher.placeUnited Kingdom-
dc.identifier.issnl0893-9454-

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