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SUMMARY:The Effect of ETF Trading on Benchmark Securities: Evidence from A
 doption of ETF Creation in Israel
DTSTART:20210625T103000
DTEND:20210625T120000
DTSTAMP:20260506T080551Z
UID:5036dd9237d0759a7871dc4a34d0ece9ac5f0bc147a9df5ff20d488a
CATEGORIES:Conferences - Seminars
DESCRIPTION:Rebecca DE SIMONE\, LBS\nExchange-traded funds (ETF) offer a l
 ow-cost way to invest in illiquid\, small securities and\, through the cre
 ation/redemption mechanism feature a tight connection between passive flow
 s and trading in the index equities. Yet the literature starkly disagrees 
 on how ETF trading affects benchmark securities. We use a 2012 reform that
  introduced the ETF creation mechanism to the Tel Aviv Stock Exchange to e
 stimate the causal effect of ETF trading on benchmark stocks\, leveraging 
 the fact that passive ownership increased by 3% of market capitalization m
 ore in small than in large equities. A 1 p.p. increase in ETF ownership as
  a percent of market capitalization increased equity prices of small stock
 s by 11.7%. Effects persist for up to two years\, significantly shifting c
 apital towards smaller firms and reducing market concentration. Moreover\,
  benchmark liquidity significantly increases and more so for small stocks.
  We benchmark our results to the literature by estimating the slope of the
  demand curve for stocks. We find it is more inelastic than has been estim
 ated using U.S. data. We interpret this and the strength of small-stock ef
 fects as evidence that the effect of ETF trading is dependent on the sever
 ity of limits to arbitrage.
LOCATION:Zoom
STATUS:CONFIRMED
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