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Tenured Assistant Professor of Finance
at Vrije Universiteit Amsterdam
Research Fellow at the Tinbergen Institute
Research interests: Financial markets, Corporate governance.
I investigate how financial instruments and structures adapt to and influence market inefficiencies and regulatory constraints, thereby shaping liquidity, risk management, and governance.
SSRN, Google Scholar
Non research interests: 3 kids, running, creating apps.
✉️ e.karmaziene@vu.nl
Upcoming presentations:
2025 Four Corners/FMRC Conference on Indexing on May 4-5 in Nashville (Tennessee, The USA);
FIRS on May 29-31 in Seoul (South Korea);
Baltic Economic Conference on June 26-27 in Vilnius (Lithuania);
EFA on August 20-23 in Paris (France).
Published Papers
Published Papers
Short Selling Equity Exchange Traded Funds and its Effect on Stock Market Liquidity
with Valeri Sokolovski
Journal of Financial and Quantitative Analysis (2022), Vol. 57(3).
We examine short selling of equity exchange traded funds (ETFs) using the 2008 short-sale ban. Contrasting the previously documented contractions in bearish strategies during the ban, we find a significant increase in short sales of the largest, most liquid ETF, the S&P 500 Spider. We offer evidence suggesting that this upsurge was driven primarily by investors circumventing the ban. We show that the ban’s detrimental effect on stock liquidity was around 30% less severe for the Spider’s constituents. Our results suggest that ETF shorts can substitute for short sales of individual stocks, thereby alleviating short-sale constraints’ adverse effect on liquidity.
Media: “Beware of the Spider: Exchange Traded Funds and the Short-Sale Ban” Oxford Business Law Blog.
with Valeri Sokolovski
Journal of Financial and Quantitative Analysis (2022), Vol. 57(3).
We examine short selling of equity exchange traded funds (ETFs) using the 2008 short-sale ban. Contrasting the previously documented contractions in bearish strategies during the ban, we find a significant increase in short sales of the largest, most liquid ETF, the S&P 500 Spider. We offer evidence suggesting that this upsurge was driven primarily by investors circumventing the ban. We show that the ban’s detrimental effect on stock liquidity was around 30% less severe for the Spider’s constituents. Our results suggest that ETF shorts can substitute for short sales of individual stocks, thereby alleviating short-sale constraints’ adverse effect on liquidity.
Media: “Beware of the Spider: Exchange Traded Funds and the Short-Sale Ban” Oxford Business Law Blog.
Fast Tracks to Boardrooms: Director Supply and Board Appointmentswith Audinga BaltrunaiteJournal of Corporate Finance (2024), Vol. 88.
We examine how the size of the labor market for corporate directors impacts board appointments in Italian private firms. Using the high-speed railway expansion as an exogenous shock to costs of serving on boards, we find that an increase in the supply of non-local directors leads to a higher degree of positive assortative matching between firms and directors. High-quality firms improve their board quality at the expense of low-quality firms. The director–firm matching effects are muted among companies with owners acting as board directors. This finding highlights the importance of director entrenchment in the corporate governance of private firms.
Media: VoxEU.
We examine how the size of the labor market for corporate directors impacts board appointments in Italian private firms. Using the high-speed railway expansion as an exogenous shock to costs of serving on boards, we find that an increase in the supply of non-local directors leads to a higher degree of positive assortative matching between firms and directors. High-quality firms improve their board quality at the expense of low-quality firms. The director–firm matching effects are muted among companies with owners acting as board directors. This finding highlights the importance of director entrenchment in the corporate governance of private firms.
Media: VoxEU.
The Greater the Volume, the Greater the Analyst
Finance Research Letters (2023), Vol. 51.
Are sell-side security analysts paid for turnover-generating research? Using hand-collected annual income data from tax records in Sweden for the 1997-2007-year period, I show that analysts’ compensations increase in the trading turnover that their recommendations generate. Analysts are paid 0.002 % of broker-trading volume, or approximately 1 % of broker’s commission revenues. The findings empirically validate the previously assumed turnover-compensation link and estimate its magnitude. The results may have policy implications related to the Markets in Financial Instruments Directive.
Media: "Are Analysts Paid for Turnover-generating Research?" Oxford Business Law Blog.
Finance Research Letters (2023), Vol. 51.
Are sell-side security analysts paid for turnover-generating research? Using hand-collected annual income data from tax records in Sweden for the 1997-2007-year period, I show that analysts’ compensations increase in the trading turnover that their recommendations generate. Analysts are paid 0.002 % of broker-trading volume, or approximately 1 % of broker’s commission revenues. The findings empirically validate the previously assumed turnover-compensation link and estimate its magnitude. The results may have policy implications related to the Markets in Financial Instruments Directive.
Media: "Are Analysts Paid for Turnover-generating Research?" Oxford Business Law Blog.
Common Ownership and Firm Dividend Policies
with Alberta Di Giuli and Naciye Sekerci
Finance Research Letters (2021), Vol.40.
This paper examines the relationship between common ownership and firm dividend policy. Using a detailed dataset from Sweden on investors’ holdings, we find that dividend policies of firms newly added to an investor’s portfolio evolve towards the dividend policies of the existing firms in this portfolio. This relationship is neither driven by investors targeting firms forecasted to change their dividend policies, nor by firms with a similar dividend strategy to the companies in the new acquirer’s existing portfolio. Instead, the effect on dividends depends on the characteristics of the new owner and of the company purchased. Our results suggest that owners have a “dividend policy style”, that they are influential in dividend decisions, and that their influence depends on the type of co-owner and the existing governance characteristics of the co-purchased firm.
with Alberta Di Giuli and Naciye Sekerci
Finance Research Letters (2021), Vol.40.
This paper examines the relationship between common ownership and firm dividend policy. Using a detailed dataset from Sweden on investors’ holdings, we find that dividend policies of firms newly added to an investor’s portfolio evolve towards the dividend policies of the existing firms in this portfolio. This relationship is neither driven by investors targeting firms forecasted to change their dividend policies, nor by firms with a similar dividend strategy to the companies in the new acquirer’s existing portfolio. Instead, the effect on dividends depends on the characteristics of the new owner and of the company purchased. Our results suggest that owners have a “dividend policy style”, that they are influential in dividend decisions, and that their influence depends on the type of co-owner and the existing governance characteristics of the co-purchased firm.
Non-Standard Errorswith Albert Menkveld et al.Note: Member of CollaborationJournal of Finance (2024), 79(3).
Management Science Reproducibility Collaborationwith Miloš Fišar et al.Note: Member of CollaborationManagement Science (2024), 70(3).Green Gains: The Impact of REITs' Environmental Performance on Sustainability-Linked Loan Interest Rates
with Tanja Artiga Gonzalez, Laura Capera Romero and Xin Yuan
Finance Research Letters (2025), 71(1).
Working Papers
Working Papers
Conditional acceptance at the JBF Competing for Dark Trades with Paul J. Irvine🚩 Runner-up for the best paper award at the EFA 2024 🚩Presentations: AFA 2024, Eastern Finance Association 2024, German Economic Association meeting 2023, Bank of Lithuania, Baltic Economic Conference 2021, Dutch Financial Markets Authority, VU Amsterdam.Abstract: We use recent European restrictions to evaluate how traders substitute across available dark pools. Our findings suggest that restricting dark trading at the most prominent platform has a detrimental effect on dark trading activity. Annual dark trading in a restricted stock decreases by more than 50% over the six-month restriction period. Consistent with investors’ sticky relationships with specific dark pools, our results suggest that substitution across dark pools is remarkably low. Despite the availability of alternative dark pools, traders are unwilling to trade elsewhere. Our study provides evidence that dark trading is not a market of exchanges, but rather a collection of independent silos. This fact has implications for the vulnerability of dark trading to the introduction of an HFT into the pool, and sharpens our understanding of how the pecking order theory of trading actually functions.
Corporate Bond ETFs & Volatilitywith Caitlin D. DannhauserPresentations: EFA 2023, EUROFIDAI 2023, *15th Annual Hedge Fund Research Conference (2024), 4th Baltic Economic Conference, BI Norwegian Business School, Investment Company Institute, NFN Webinar, Queen’s University Belfast, Vilnius Winter Meeting 2021, VU Amsterdam.
Abstract: Higher exchange-traded fund (ETF) ownership lowers the return volatility of corporate bonds, particularly less liquid and smaller bonds. We link the main effect to the secondary market trading of ETFs serving as a liquidity buffer and the effect is heighted for bonds held by more liquid ETFs and ETFs with higher institutional ownership. Our findings highlight the stabilizing role the liquidity of ETF secondary market trading play in the corporate bond market. In contrast, for a given level of ETF ownership greater ETF primary market activity through the in-kind creation and redemption process increases volatility. The combination of these results implies a dual role of ETF ownership on corporate bonds – they act as a buffer and transmitter.
The Dealer Warehouse - Corporate Bond ETFs
with Caitlin D. Dannhauser
Abstract: We demonstrate that bonds experiencing higher selling pressure are more likely to be incorporated into ETF creation baskets, thereby increasing ETF ownership. This finding aligns with the adaptable nature of primary corporate bond ETF markets, enabling dealers to mitigate inventory risk during periods of idiosyncratic uncertainty. By serving as a repository for dealers to mitigate inventory risk, ETFs add another layer of market-making and reduce the idiosyncratic volatility of bonds.
Shifts in Trading from Stocks to ETFswith Christopher RigsbyPresentation: VU Amsterdam.
Abstract: This paper investigates the migration of trading activity between individual and composite securities. Using the Tick Size Pilot Program (TSPP) as a natural experiment, we find that when liquidity in certain stocks declines, trading in ETFs with a higher proportion of these affected stocks increases by 35%. The shock to stock liquidity does not impact ETF liquidity, suggesting that ETFs become relatively cheaper to trade. We observe significant spillover effects to the primary market: to accommodate the trading demand ETF shares outstanding increase by 17%. Our findings enhance understanding of the interplay between ETFs and underlying stocks, highlighting ETFs' role as liquidity providers when stock markets face frictions.
Short Sales Announcements and Asset Holdingswith Natalie Kessler
Older papers
Mutual Fund Flows and Investor SentimentPresented at: Swedish House of FinanceOlder papers
Incentives of Financial Analysts: Trading Turnover and CompensationPresented at: Belgian Finance Forum, EFA (Lisbon), ISM, University of Gothenburg, SIFR, 2nd Annual Lithuanian Conference on Economic Research, NFN2013.Media: "Are Analysts Paid for Turnover-generating Research?", Oxford Business Law Blog
Motives for Entrepreneurial Saving: Evidence from Sweden
with Fatemeh HosseiniPresented at: Bank of Lithuania, Bank of Hungary, Boğaziçi University, Copenhagen Business School, Erasmus University Rotterdam, University of Gothenburg, University of Groningen, ICEF, Istanbul Technical University, LSE, NFN2016, Stockholm Business School, Stockholm School of Economics.
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