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Francesco
Franzoni Professor of Finance, USI Lugano Senior Chair, Swiss Finance Institute Research Fellow, CEPR Ph.D. in Economics, 2002, Massachusetts Institute
of Technology Email: francesco.franzoni@usi.ch Twitter: @FranzFranzoni Address: Via G. Buffi 13 6904, Lugano - Switzerland Tel.: +41 58 666 4117 Fax: +41 58 666 4734 |
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Teaching Material (Ph.d.) Published
Research Papers · Ben-David I., Franzoni F.,
Moussawi R., Sedunov J. (2020), The Granular Nature
of Large Institutional Investors, Management Science,
forthcoming. Harvard Law School Forum
on Corporate Governance and Financial Regulation Post Stigler Center
Pro-Market Blog Post ·
Cotelioglu E., Franzoni F. and Plazzi A.
(2020), What Constrains
Liquidity Provision? Evidence From Institutional
Trades, Review of Finance, forthcoming. ·
Barbon A., Di Maggio M., Franzoni F., Landier A.
(2019), Brokers and Order
Flow Leakage: Evidence from Fire Sales, Journal of Finance,
74(6), 2703-2705, lead article. ·
Ben-David
I., Franzoni F., Moussawi R. (2019), A Note to “Do ETFs Increase Volatility?”: An
Improved Method to Predict Assignment of Stocks in to Russell Indexes,
Journal of Finance, Replications and Comments (web-only). ·
Franzoni
F., Giannetti M. (2019), Costs and Benefits
of Financial Conglomerate Affiliation: Evidence from Hedge Funds, Journal of Financial Economics,
134(2), 355-380. ·
Di Maggio M., Franzoni F., Kermani
A., Sommavilla C. (2019), The Relevance of
Broker Networks for Information Diffusion In the Stock Market,
Journal of Financial Economics, 134(2), 419-446. ·
Ben-David
I., Franzoni F., Moussawi R. (2018), Do ETFs Increase
Volatility? Journal of Finance, 73(6), 2471-2535, lead article. ·
Franzoni F. and
Schmalz M. (2017). Fund Flows and
Market States.
Review of Financial Studies, 30(8), 2621-2673. ·
Ben-David I., Franzoni F., Moussawi R. (2017). Exchange Traded
Funds (ETFs). Annual Review
of Financial Economics, 169-189. NBER
Working Paper No. 22829 ·
Ben-David I., Franzoni F., Landier
A., Moussawi R. (2013). Do hedge funds
manipulate stock prices? Journal of Finance, 68(6), 2383-2434. ·
Ben-David I., Franzoni F., Moussawi R. (2012). Hedge Fund Stock
Trading in the Financial Crisis of 2007-2009.
Review of Financial Studies, 25(1), 1-54, lead article. ·
Franzoni
F., Nowak E., Phalippou L. (2012). Private
equity performance and liquidity risk,
Journal of Finance, December, 2341-2373. Internet Appendix ·
Franzoni F. (2009). Underinvestment vs.
Overinvestment: Evidence From Price Reactions To
Pension Contributions. Journal of Financial Economics, 92(3), June, 491-518. ·
Adrian
T., Franzoni F. (2009). Learning about beta: Time-varying factor loadings, expected returns,
and the conditional CAPM. Journal of
Empirical Finance, 16(4), September, 537-556. ·
Franzoni F., Marin J. (2006). Pension Plan
Funding and Stock Market Efficiency. Journal
of Finance, April, 921-956. ·
Franzoni F., Marin J. (2006). Portable Alphas From Pension Mispricing. Journal of
Portfolio Management, Summer, 2006, 44-53. Working Papers ·
Di
Maggio M., Egan M., Franzoni F. (2018), The Value of Intermediation
in the Stock Market Abstract: Brokers continue to play a critical role in intermediating
stock market transactions for institutional investors. More than half of all
institutional investor order flow is still executed by high-touch (non-electronic)
brokers. Despite the importance of brokers, we have limited information on
what drives investors' choices among brokers. We develop an empirical model
of intermediary choice to investigate how institutional investors trade
across different brokers. We analyze investors' responsiveness to the
commissions paid, the broker's ability to efficiently execute the trades, as
well as access to better research analysts and order flow information. We
find that investors are relatively insensitive to commissions, but on average
value research, execution, and access to information. Furthermore, using
trader-level data we find that investors are more likely to trade with
brokers who are physically located closer and are less likely to trade with
brokers whose traders have misbehaved in the past. There is also significant
heterogeneity across investors, with the best performing investors placing a
higher value on order flow information and less value on research. We use the
model to analyze several counterfactuals highlighting key inefficiencies in
the market that raise trading costs. ·
Ben-David
I., Franzoni F., Moussawi R., Kim B. (2021), Competition for
Attention in the ETF Space NBER
Working Paper No. 28369 Virtual Finance
Seminar in Corporate Finance and Investments (on youtube) Abstract: Exchange-Traded Funds (ETFs) are the most prominent
financial innovation in the last three decades. Early ETFs offered
broad-based portfolios at low cost. As competition became more intense,
issuers started offering specialized ETFs that track niche portfolios and
charge high fees. Specialized ETFs hold stocks with salient characteristics –
high past performance, media exposure, and sentiment – that are appealing to
retail and sentiment-driven investors. After their launch, these products
perform poorly as the hype around them vanishes, delivering negative
risk-adjusted returns. Overall, financial innovation in the ETF space follows
two paths: broad-based products that cater to cost-conscious investors and
expensive specialized ETFs that compete for the attention of unsophisticated
investors. ·
Di
Maggio M., Franzoni F., Kogan S., Xing R. (2021), Institutional Trading
around Scheduled Firm and Macroeconomic Announcements Abstract: Recent literature documents a large return premium around
scheduled news announcements. Using transaction-level data, we investigate
institutional trading behavior around these announcements. We find that
institutions, i.e. both hedge funds and mutual funds, on average sell in the
period leading to these scheduled announcements. Several elements suggest
that this behavior is motivated by uncertainty avoidance. In particular, we
show that hedge funds and mutual funds with a more volatile capital base are
more prone to liquidating their positions ahead of the announcements. This
pattern is present for several types of scheduled news – earnings
announcements, M&A completions, and Federal Open Market Committee (FOMC)
meetings. The evidence suggests that mutual funds on average forego about
1.63% per year in gross returns because of sales before earning
announcements. Finally, the findings lend credibility to the risk-based
explanations of the return premium around scheduled news. ·
Di Maggio M., Franzoni F., Massa M.,
Tubaldi R. (2020), Strategic Trading as a Response to Short Sellers Abstract: We study empirically whether short selling deters the
incorporation of positive information. We find a sizeable reduction of
positive information impounding before earnings announcements for stocks more
exposed to short selling. The price pressure of short sales cannot explain
this effect. Rather, consistent with strategic behavior, investors with
positive views slow down their trades when short sellers are also present.
Furthermore, they break up their buy trades across multiple brokers,
suggesting they wish to prevent their information from leaking. The findings
suggest that short selling can hinder price discovery when investors receive
different information signals. ·
Franzoni
F. (2008), The changing nature
of market risk Abstract: In the first three decades of CRSP
data, value stocks have higher betas than growth stocks. Later on, the
ranking is reversed and the gap in beta widens. What makes growth strategies
nowadays bear more market risk than value strategies? What are the causes of
the reversal in the ranking of betas? The paper argues that the negative link
between beta and BM is due to growth options. The shift of listed firms
towards more growth-oriented businesses has progressively changed the nature
of market risk. The ultimate determinant of this evolution is conjectured to
be financial market development, which has lowered the cost of capital. For
this reason, the facts described in this paper resonate with other long-run
phenomena, such as the rise in idiosyncratic risk and the R&D boom. ·
Franzoni
F. (2002), Where is beta going? The
riskiness of value and small stocks (cite as: Ph.d. Thesis, Massachusetts Institute of Technology) Abstract: This
paper finds that the market betas of value and small stocks have decreased by
about 75% in the second half of the twentieth century. The path of beta can
be closely tracked using variables that summarize the state of the economy.
On the basis of this analysis, the decline in beta can be related to a
long-term improvement in economic conditions that made these companies less
risky. Decomposing beta into the cash flow and expected return news
components confirms that the payoffs of these companies are less sensitive to
market conditions. This finding has implications for the debate on the CAPM
anomalies. Media clips Wall Street Journal,
February 5, 2021, New ETFs, Forced to
Chase Trends, Shorten Their Own Lives, by Mark
Hulbert Reuters, January 27, 2021, Column: Bubble-wary markets eye ETF crush in tech
and crypto, by Mike Dolan Financial Times, January 26,
2021, Thematic ETFs can deliver
significant losses, academics find, by Emma
Boyde Bloomberg, January 21, 2021,
Day-Trader Frenzy
for Trendy Stocks Is Defying Decades of Losses, by Yakob Peterseil Wall Street Journal, January
15, 2021, The Story Behind
the Market’s Hottest Funds, by Jason Zweig Seeking Alpha, August 27,
2020, The Impact Of
Concentration Of Assets At Institutional Fund Managers, by Larry Swedroe Le Temps, August 24, 2020, Big is not beautiful, by Jean
Keller (in French) Financial Times, August 8,
2020, Top 10 institutional investors fuel market volatility,
study finds, by
Chris Flood Finnews.ch, October 2, 2019,
Some Investors Have
To Do The Heavy Lifting, by Claude Baumann Forbes, April 17, 2019, Concentration In
The Asset Management Industry: Implications For Corporate Engagement, by Bob
Eccles Finanz und Wirtschaft, Institutionelles Anlegen, October
27, 2018, Gefahren Im ETF-Markt, (English translation) Investir, August 15, 2018, L’impact des ETF
sur la volatilité des marches, by Fabio Lopes (in French) Wall Street Journal, July
19, 2018, ETFs Ruffle Markets, by Asjylyn Loder Finanz und
Wirtschaft, June 23, 2018, Wenn passive Anlagen Sorgen bereiten (in German) Neue Zürcher Zeitung, June 21, 2018, ETF machen den Markt volatile, by Christof Leisinger (in German) Le Temps, June 20, 2018, Les ETF augmentent l’instabilité
des marchés, by
Mathilde Farine (in French) CNBC, February 14, 2018, Insider trading is
still rampant on Wall Street, two new studies suggest, by
Thomas Franck The Economist, February 8,
2018, Insider trading has
been rife on Wall Street, academics conclude. Swiss National Radio (RSI
1), Modem, February 7, 2018, Discussing the
Market Drop of February 5, 2018 (in
Italian). Financial Times, February 5,
2018, ETF growth is in
danger of devouring capitalism, by Robin
Wigglesworth Bloomberg View, December 14,
2017, Broker
Leaks, by Matt Levin MarketWatch, November
17, 2017, Fears grow that
popularity of ETFs is a ticking time bomb, by Ryan Vlastelica Finanz und Wirtschaft, September 9, 2017, ETF führen zu stärkeren
Kursausschlägen, by Sandro Rosa Dealbreaker, July 11,
2017, In The Dog-Eat-Dog
World Of Asset Management, Prime Brokers Are Vultures, by Owen
Davis Wall Street Journal, MoneyBeat Blog, June 21, 2017, Are Activists Being
Sabotaged by Their Brokers?, by
Alexander Osipovich Institutional Investor, June
20, 2017, Brokers May Be
Giving Away Investors’ Best Ideas Bloomberg View, June 20,
2017, Bank Relationships
and Index Rules (scroll down to Leaky Brokers section), by Matt
Levine 6th
Swiss Asset Management Day, April 6, 2017, Panel Discussion on Private Markets, Active
Management, and Hedge Funds ETF.com,
December 28, 2016, ETFs A Double-Edged
Sword, by Larry Swedroe Alpha
Architect, December 8, 2016, A Really Cool Paper
(and Graphic) on ETFs, by Wesley R. Gray Financial
Times, November 17, 2016, Debate Intensifies
over ETFs’ Impact on Markets. Bloomberg
View, November 8, 2016, Broker Networks, by Matt
Levine Chief
Investment Officer, August 4, 2016, How Investment
Management Giants Cause Volatility, by Amy
White Financial
Times, February 1, 2015, Has the death knell
of active management been rung too soon?, by
Robert Pozen and Theresa Hamacher PBS Newshour, September 12, 2014, Why is Wall Street
becoming more bipolar? Alphaville (Financial Times), May 1,
2014, When ETFs make
things more volatile, by Izabella Kaminska Reuters,
April 30, 2014, A volatile love
affair with exchange funds and indexes, by Mike
Dolan IFR,
September 25, 2013, Investing when the
tide goes out, by James Saft Wall
Street Journal, December 6, 2012. Article citing the
“Do Hedge Funds Manipulate Stock Prices?” paper TheStreet.com,
August 2, 2012, ETF Arbitrage May
Be Driving Market Volatility Plus–Il Sole 24 Ore, February
18, 2012, Rischio arbitraggi fra prezzi e Nav, by Gianfranco Ursino WealthAdviser, February, 2012, ETFs, arbitrage and contagion: a potential
link?, Wall
Street Journal, The Intelligent Investor, December 24, 2011, Now That's
Performance Art, by Jason Zweig HandelsZeitung, December, 2011, Alphatiere Auf Abwegen Research
News at OSU, 25 August, 2011, Hedge Funds Sold Stocks Quickly
During Financial Crisis, Hurting Mutual Fund Investors, by Jeff Grabmeier Insider
Monkey, June, 2011, Do hedge funds
manipulate stock prices?, Il Mondo, June, 2011, Così l’Hedge gioca con i
prezzi, by
Fabio Sottocornola AllAboutAlpha.com,
March 2, 2011, Hedge
funds and “stock manipulation”: Perpetrators, accomplices or just in the
wrong place at the wrong time (again)?, Il Mondo, December, 2010, Mosse tattiche da Hedge, by Fabio Sottocornola AllAboutAlpha.com, August 30, 2010, Under the hood:
Ground breaking private equity study examines actual investments, not just
funds, AllaboutAlpha.com, AllAboutAlpha.com,
March 14, 2010, Study: Hedge funds’
role in 2008 market drawdown “questionable” CFA
digest, 2006, Pension Plan
Funding and Stock Market Efficiency, by Lester
C. Cheng |
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