Exchange traded funds (ETFs) that track a specified index are a financial technology that has risen dramatically in the last two decades. We model an ETF's optimal index replication strategy and show that it involves underweighting or omitting illiquid index assets. Instrumenting for ETF trading...

Does high-frequency trade increase or decrease volatility in financial markets during crises? We introduce a novel intraday volatility measure for ETFs, and find that during the COVID-19 crisis period, the withdrawal of high-frequency trade from large stock ETFs increases intraday ETF volatility...