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ETF ownership and firm-specific information in corporate bond returns

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  • Rhodes, Meredith E.
  • Mason, Joseph R.

Abstract

We analyze the relation between ETF ownership and firm-specific information in corporate bond returns. ETF ownership appears to weaken bond price informativeness by altering the flow of firm-specific information to bonds. Bonds with low (high) ETF ownership are sensitive (insensitive) to the same information as equity. Using earnings announcements, we show that bonds with low ETF ownership react to earnings news, but bonds with high levels do not. Moreover, we find a positive association between investment-grade bond return comovement with the market and ETF ownership, implying that return variation is less attributable to firm-level information as ETF ownership increases.

Suggested Citation

  • Rhodes, Meredith E. & Mason, Joseph R., 2023. "ETF ownership and firm-specific information in corporate bond returns," Journal of Financial Markets, Elsevier, vol. 63(C).
    • Handle: RePEc:eee:finmar:v:63:y:2023:i:c:s1386418122000623
    DOI: 10.1016/j.finmar.2022.100772
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    More about this item

    Keywords

    Financial intermediation; Fixed-income securities; Bonds; Exchange-traded funds; Information; JEL classification: G0; G12; G23;
    All these keywords.

    JEL classification:

    • G0 - Financial Economics - - General
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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