Review of Financial Studies Vol. 36 No. 3 2023

Exchange-Traded Funds and Real Investment

Constantinos Antoniou¹; Frank Weikai Li²; Xuewen Liu³; Avanidhar Subrahmanyam⁴; Chengzhu Sun⁵

¹ University of Warwick , UK · ² Singapore Management University Lee Kong Chian School of Business, , Singapore · ³ The University of Hong Kong , Hong Kong · ⁴ University of California , Los Angeles, USA · ⁵ School of Accounting and Finance, The Hong Kong Polytechnic University, Hong Kong

Abstract

We investigate the link between exchange-traded funds and real investment. Cross-sectionally, higher ETF ownership is associated with an increased sensitivity of real investment to Tobin’s q and a heightened ability of stock returns to forecast future earnings. Inclusion of stocks in industry ETFs enhances investment-q sensitivity and implies greater incorporation of earnings information into prices prior to public releases. Greater nonmarket ETF ownership leads to increased (reduced) reliance of real investment on own (peers’) stock prices. Overall, the evidence is consistent with ETFs positively affecting real investment efficiency via greater flows of information.

DOI

10.1093/rfs/hhac043

Volume

36

Issue

3

Pages

1043-1093

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

APA 7 MLA 9 Chicago (author–date) Harvard Elsevier Harvard (JFE, JBF…) The Accounting Review Academy of Management American Marketing Association INFORMS (Management Science) Copy citation Copied ✓