The rise of stock indexing has raised concerns that index investing impedes arbitrage and degrades price discovery …. This paper uses Russell’s reconstitution to identify the causal effect of index investing on information arbitrage and … for micro-cap stocks. Our causal evidence identifies the relaxation of arbitrage constraints as a mechanism through which …

follows. We find weak and shortlived return spillovers, in particular from the USA to Japan. Volatility spillovers are more …