Koont, Naz; Ma, Yiming; Pástor, Ľuboš; Zeng, Yao - National Bureau of Economic Research - 2022
Exchange-traded funds (ETFs) are typically viewed as passive index trackers. In contrast, we show that corporate bond … ETFs actively manage their portfolios, trading off index tracking against liquidity transformation. In our model, ETFs … optimally choose creation and redemption baskets that include cash and only a subset of index assets, especially if those assets …