Exchange-traded fund ownership and underlying stock mispricing

In response to the increasing proliferation of exchange-traded funds (ETFs), and a warning from the Wall Street hero Michael Burry that passive investing has put the stock market into ‘bubble’ territory, we examine the relation between stock ownership by ETFs and mispricing from 2002 to 2018. We find that increased ETF ownership induces overpricing in underlying stocks. We then identify three mechanisms for this relationship: the overpricing of stocks attributable to increased ETF ownership is stronger for stocks that experience an increase in passive ETF ownership; during periods characterised by high investor sentiment; and for illiquid stocks. Our results are robust to a battery of tests including alternative measures for all key variables and are not confounded by the global financial crisis. Additional analyses show that mispricing caused by ETF ownership change is not driven by firm fundamentals and does not exacerbate stocks' information environment around earnings announcement.     

Disparity in high school enrollment between native and immigrant children in Japan

Using nonlinear decomposition, this study examines the gap in high school enrollment between native and immigrant children based on data from the 2010 Population Census. The school attendance probability of immigrant children is significantly lower than that of native children. Factors contributing to the gap are the length of stay in Japan, parental employment status, and home ownership. The total explained part of all observable factors is approximately 30% in the comparison between native and immigrant children whose parents are both foreigners. Furthermore, immigrant children who do not attend high school are more likely to be unemployed.