Published in:Finance Down Under 2019 Building on the Best from the Cellars of Finance
Extent:
1 Online-Ressource (57 p)
Language:
English
DOI:
10.2139/ssrn.2836518
Identifier:
Origination:
Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments May 1, 2018 erstellt
Description:
We provide novel evidence that arbitrageurs use exchange-traded funds (ETFs) as an avenue to circumvent short-sale constraints at the stock level. Using a large sample of U.S. equity ETF holdings, we document that shorting activity on ETFs rises with the difficulty of shorting the underlying stocks. Stocks that are heavily shorted via their holding ETFs underperform those lightly shorted by 90 basis points per month. The return predictability of ETF short selling on individual stocks is distinct from stock-level shorting measures, and is concentrated among stocks that face the most severe arbitrage constraints. Our evidence suggests that ETFs improve information efficiency by allowing arbitrageurs to target overpriced stocks that are otherwise difficult to short