We show that ETF arbitrage distorts the market reaction to fundamental shocks. We confirm this hypothesis by creating a new measure of the intensity of arbitrage transactions at the individual stock level and using an event study analysis to estimate the market reaction to economic shocks. Our...

This study examines the price discovery role of VIX futures in determining the levels of various spot VIX series. We analyze both the short-term linkage using the bivariate Granger causality model as well as the long-term linkage using the Johansen cointegration model with a vector error...