Foxes in the hen-house : single stock traders hiding in ETF order flow
Name
1132234251-MIT.pdf
Size
4.8 MB
Format
Adobe PDF
Checksum (MD5)
4128ed9d79ab04cf2f5bad5f8226bb1b
Author(s)
Ernst, Thomas(Thomas H.)
Advisor(s)
Haoxiang Zhu.
Alternative Title
Single stock traders hiding in exchange traded funds order flow
Date Issued
2019
Publisher
Massachusetts Institute of Technology
Abstract
Conventional wisdom suggests that exchange traded funds (ETFs) protect uninformed investors from informed traders by diversifying holdings across a basket of securities. Contrary to this belief, I develop a theoretical model where investors with stock-specific information do trade in ETFs whenever the stock's weighting in the ETF is high or whenever the information asymmetry is large. As a result, ETF trades can allow price discovery about specific underlying stocks. High-frequency evidence from Sector SPDR ETFs supports the predictions of my model. I conclude that ETFs, especially narrowly constructed ETFs, are far from immune to single-stock informed trading.
Description
Thesis: S.M. in Management Research, Massachusetts Institute of Technology, Sloan School of Management, 2019
Cataloged from PDF version of thesis.
Includes bibliographical references (pages 50-51).
Subjects
Sloan School of Management.
MIT Department
Sloan School of Management
Terms of Use
MIT theses are protected by copyright. They may be viewed, downloaded, or printed from this source but further reproduction or distribution in any format is prohibited without written permission.
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