Does ETF Ownership Increase S&P 500 Stock Volatility?

Abstract

This thesis studies the relation between exchange-traded fund ownership and volatility for 396 equity ETFs in the United States, using a data set comprising 11 years, from January 2008 to December 2018. We study stocks listed on the S&P 500 Index, using OLS regressions to investigate whether ETF ownership increase the volatility of underlying stocks. We find that a one-standard-deviation increase in ETF ownership would lead to a shift in the volatility of the median stock in the sample to a place between the 60th and 73rd percentiles. We conclude that in the period from 2008 to 2018 ETF ownership increases S&P 500 Index stocks volatility.