, informed investors, and noise traders. Arbitrageurs face a trade-off between arbitrage and inference: they would like to buy … assets in response to temporary price declines (the arbitrage effect) but sell when prices decline permanently (the inference … effect). In equilibrium, the presence of arbitrageurs increases volatility when the inference effect dominates the arbitrage …

-pair level indicate that ETF ownership significantly increases commonality. We show that greater arbitrage activities are … of Russell indexes, and ETF trading halts, to establish the causal effect of ETF ownership and the arbitrage mechanism …

differences in skill are revealed through growing assets under management rather than risk-adjusted performance. …

that securitization improves financial stability if the securitized assets are held by capital market participants, rather …-backed securities (MBS) to evaluate this claim for subprime securitization during the Great Recession. I find that output in the U … subsequent deleveraging amplifies business cycles. My findings suggest that the existence of the securitization market stabilizes …