We find that stock liquidity increases stock price crash risk. To identify the causal effect, we use the decimalization of stock trading as an exogenous shock to liquidity. This effect is increasing in a firm’s ownership by transient investors and non-blockholders. Liquid firms have a higher...

Using the reconstitution of MSCI indices in seven Asian markets from 2006 to 2021, we discover arbitrage opportunities arising from index-tracking funds’ efforts to minimize tracking errors around the dates when index reconstitution changes become effective (i.e., effective dates). We document...

Using the reconstitution of MSCI indices in seven Asian markets from 2006 to 2021, we discover arbitrage opportunities arising from index-tracking funds’ efforts to minimize tracking errors around the dates when index reconstitution changes become effective (i.e., effective dates). We document...