Rabih Moussawi

Villanova University
800 Lancaster Ave
Bartley 2051
Villanova, PA 19085

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Institutional Affiliation: Villanova University

NBER Working Papers and Publications

October 2019An Improved Method to Predict Assignment of Stocks into Russell Indexes
with Itzhak Ben-David, Francesco Franzoni: w26370
A growing literature uses the Russell 1000/2000 reconstitution event as an identification strategy to investigate corporate finance and asset pricing questions. To implement this identification strategy, researchers need to approximate the ranking variable used to assign stocks to indexes. We develop a procedure that predicts assignment to the Russell 1000/2000 with significant improvements relative to previous approaches. We apply this methodology to extend the tests in Ben-David, Franzoni, and Moussawi (2018).
November 2016Exchange Traded Funds (ETFs)
with Itzhak Ben-David, Francesco Franzoni: w22829
Over nearly a quarter of a century, ETFs have become one of the most popular passive investment vehicles among retail and professional investors due to their low transaction costs and high liquidity. By the end of 2016, the market share of ETFs topped over 10% of the total market capitalization traded on US exchanges, while representing more than 30% of the overall trading volume. ETFs revolutionized the asset management industry by taking market share from traditional investment vehicles such as mutual funds and index futures. Because ETFs rely on arbitrage activity to synchronize their prices with the prices of the underlying portfolio, trading activity at the ETF level translates to trading of the underlying securities. Researchers found that while ETFs enhance price discovery, they als...

Published: Exchange-Traded Funds. Itzhak Ben-David, Francesco Franzoni, Rabih Moussawi Vol. 9, 2017, pp. 169–189

May 2016The Granular Nature of Large Institutional Investors
with Itzhak Ben-David, Francesco Franzoni, John Sedunov: w22247
Large institutional investors own an increasing share of the equity markets in the U.S. The implications of this development for financial markets are still unclear. The paper presents novel empirical evidence that ownership by large institutions predicts higher volatility and greater noise in stock prices as well as greater fragility in times of crisis. When studying the channel, we find that large institutional investors exhibit traits of granularity, i.e., subunits within a firm display correlated behavior, which reduces diversification of idiosyncratic shocks. Thus, large institutions trade larger volumes and induce greater price impact.
April 2014Do ETFs Increase Volatility?
with Itzhak Ben-David, Francesco Franzoni: w20071
We study whether exchange traded funds (ETFs)--an asset of increasing importance--impact the volatility of their underlying stocks. Using identification strategies based on the mechanical variation in ETF ownership, we present evidence that stocks owned by ETFs exhibit significantly higher intraday and daily volatility. We estimate that an increase of one standard deviation in ETF ownership is associated with an increase of 16% in daily stock volatility. The driving channel appears to be arbitrage activity between ETFs and the underlying stocks. Consistent with this view, the effects are stronger for stocks with lower bid-ask spread and lending fees. Finally, the evidence that ETF ownership increases stock turnover suggests that ETF arbitrage adds a new layer of trading to the underlying s...

Published: ITZHAK BEN-DAVID & FRANCESCO FRANZONI & RABIH MOUSSAWI, 2018. "Do ETFs Increase Volatility?," The Journal of Finance, vol 73(6), pages 2471-2535. citation courtesy of

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