AFBC-Synthetic Shorting with ETFs

Weikai Li    Frank Weikai Li, Qifei Zhu
10 Nov 2016
Categories: General Market Analysis, Investment Management, Equity Investments, Behavioral Finance

Country or region: Asia Pacific (Overall)

We provide novel evidence that arbitrageurs use exchange-traded funds (ETFs) as an avenue to circumvent short-sale constraints at the stock level. Using a large sample of U.S. equity ETF holdings, we document that shorting activity on ETFs rises with the difficulty of shorting the underlying stocks. Stocks that are heavily ......

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