ETF ownership and firm-specific information in corporate bond returns

Meredith E. Rhodes and Joseph R. Mason

Journal of Financial Markets, 2023, vol. 63, issue C

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.

Keywords: Financial intermediation; Fixed-income securities; Bonds; Exchange-traded funds; Information; JEL classification: G0; G12; G23 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finmar:v:63:y:2023:i:c:s1386418122000623

DOI: 10.1016/j.finmar.2022.100772

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