In the United States, exchange-traded funds can defer capital gains taxes of their investors by taking advantage of a legal loophole. To quantify the impact of this tax loophole on investor portfolios, we study a rank-dependent expected utility model. We develop an approximation formula for the...

Exchange Traded Funds (ETFs) have proven to be extremely popular amongst both retail and institutional investors. The increasing interest in this asset class may incite overconfidence in its' investor base, which could lead to undesirable market effects such as security mispricing, excess...