Abstract
How do exchange-traded funds (ETFs) influence real investment policies? We find that ETF ownership is associated with an increase in the sensitivity of real investment to Tobin's q. This implies a managerial learning channel, wherein higher ETF ownership increases price informativeness about systematic shocks. Supporting this pathway, higher ETF ownership is associated with higher predictability of future systematic earnings from stock prices, and reduced responsive of investment to stock prices of peers. Overall, the evidence is inconsistent with ETFs exerting a negative effect on real efficiency; the opposite hypothesis receives more support in the data.
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