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





Link to CV


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

VoxEU Column

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.

Internet Appendix


·         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


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)


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


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


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


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)


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