Abstract
This paper examines the role exchange-traded funds (ETFs) play in providing information to underlying corporate bond markets. We document liquidity improvements for individual corporate bonds regardless of market direction. That increased liquidity, however, comes at the cost of greater market sensitivity. Three separate tests show that increased ETF ownership increases the systematic risk component of bond prices and disrupts the flow of firm-specific information to underlying bonds. The results suggest, therefore, that while ETF ownership improves bond market liquidity, ownership is associated with a dissociation between bond prices and firm fundamentals. Mutual fund ownership does not have the same effect, suggesting the active intraday trading that is the hallmark of ETFs may also serve as the mechanism through which information flow is affected.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
