Trading Down: The Effects of Active Trading on One-Month ETF Returns
Ian Gray (Loyola Marymount University)
December 15, 2021
Ark Investment Management (ARK), led by CIO Cathie Wood, has risen to prominence over the past few years because of its remarkable performance. Because of requirements for active ETFs to publish daily holdings, market participants have gained unprecedented access to following the path to market-beating performance. ARK is celebrated for both its stock picking and active trading abilities. In this paper, I study how active trading affects alpha from ARK’s funds, and I create static synthetic portfolios to strip out the effects of active trading. I find that active trading on average reduces ARK’s one-month returns by 1.36 percentage points.

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