Abstract: This paper argues that a lesser-known yet economically significant tax-deferral feature of ETFs' security design is crucial to their success. By relying on the in-kind redemption exemption, authorized participants help ETFs avoid distributing capital gains and reduce their tax overhang, partly by deploying heartbeat trades. We estimate that the ETF tax efficiency has increased long-term investors' after-tax returns by 1.05% per year relative to mutual funds in recent years. Exploiting cross-sectional and time-series variations in investors' tax burden, we show that tax efficiency is a significant driver of capital migration by high-net-worth investors from mutual funds into ETFs.

Abstract: This paper revisits the glass cliff phenomenon in corporate spheres, which asserts that women predominantly advance into leadership roles in precarious times, when the chance of failure is highest. Compared to prior studies, we greatly expand the sample of female CEO appointments by extending our sample in time and breadth. Moreover, we address confounding effects and explore heterogeneous and non-linear relationships. Using a variety of accounting- and market-based variables to proxy for precarious situations, our results do not provide clear evidence of a glass cliff effect in US corporations, implying that earlier findings may have been specific to the samples and methods used.

Abstract: We examine the introduction of fractional trading and its impact on retail security ownership. Fractional trading aims to increase investor access to securities with high prices. Over the initial months of Robinhood's fractional trading program, the number of unique owners increases approximately 53 percentage points more for stocks priced above $100 versus those priced below $50. On an intraday basis, high-price stocks exhibit incremental ownership growth specifically during periods when fractional trading is permitted. Our results show that Robinhood investors make ample use of fractional trading to acquire previously inaccessible securities, indicating a substantial reduction in price-based investing frictions and carrying implications for retail portfolio management. In addition, we show that the potential market impacts of fractional trading activity appear negligible based on share volume data from multiple brokers with fractional trading programs.

Abstract: Using data on stocks held by individual investors at retail brokerage firm Robinhood, we document that these investors are actively engaged in both momentum and contrarian trading strategies. In response to the increased volatility and uncertainty in financial markets due to the COVID-19 pandemic in March 2020, we find that retail investors reduce momentum trading and increase contrarian trading activity during the initial phase of this crisis. We also find that the impact of Robinhood investors on several measures of market quality varied depending on market conditions, coinciding with better market quality during less-stressful periods and worse market quality during the early weeks of the pandemic in the U.S.

Abstract: Small public firms are subject to a bank hold-up problem whereby a bank's information monopoly precludes competition from other financing sources, leading to an overreliance on bank lending and increased borrowing costs. Exploiting quasi-random variation in Russell 2000 index assignment, we find that index membership affects how small public firms obtain financing, in a manner consistent with index membership mitigating the bank hold-up problem. Russell 2000 firms initiate 34% fewer bank loans, conduct more seasoned equity offerings, and obtain 58 basis points lower bank loan spreads than similar firms outside the index. These effects are largest for recent Russell 2000 additions and do not reverse in the year following index deletion. Overall, our findings suggest that index membership creates an information environment that increases the feasibility of non-bank financing and persists for some time after index deletion.

Abstract: How do people update their beliefs upon observing others' forecasts? We conduct a series of forecasting experiments to determine whether people can recognize that others can see news that is qualitatively similar, but distinct, from the news that they observe. We document that subjects frequently fail to revise their forecasts even though they should always revise them in our setting. This tendency is most pronounced when subjects learn that another subject observed news that is qualitatively similar ("good" or "bad") to the news that they observed. Our findings reveal concrete situations where forecasts can be expected to be biased.

Abstract: This paper documents that small-cap mutual funds allocate on average 27% of their portfolio to mid- and large-cap stocks. We find that larger and older small-cap funds are more likely to hold mid- and large-cap stocks, consistent with funds straying from their objective over time. Funds that invest heavily in mid- and large-cap stocks expose their investors to unanticipated risks but investors do not experience higher abnormal returns or performance persistence overall.