Abstract
Bhojraj, Mohanram, and Zhang (2020) examine how the presence of different types of Exchange Traded Funds (ETFs) affects information transfer across firms. Using earnings announcements as an information event, the authors document that sector ETFs improve informational efficiency by better facilitating information transfer across firms. Furthermore, sector ETFs reduce post-earnings announcement drift. However, the findings using broad ETFs are mixed. In this discussion, I first place the paper within the broader literature that investigates the informational efficiency of stock prices. Second, I highlight the key insights and contributions of the paper. Third, I discuss empirical design issues and the interpretation of findings. Lastly, I suggest areas for future research.
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