Implications of Passive Investing

[Shane]

Hoping someone can point me to some interesting articles.  I'm wondering if there is a definitive answer for whether passive investing alters stock prices or if it is neutral.  Will growing passive allocations push the winners higher and loser lower, or is price discovery really decided only by active managers?

 

Any thoughts would be helpful.

[Cigarbutt]

Hoping someone can point me to some interesting articles.  I'm wondering if there is a definitive answer for whether passive investing alters stock prices or if it is neutral.  Will growing passive allocations push the winners higher and loser lower, or is price discovery really decided only by active managers?

Any thoughts would be helpful.

Hi Shane,

My long term goal is to switch to passive investing and am actively working on achieving that goal.

Some ideas:

https://research-doc.credit-suisse.com/docView?language=ENG&format=PDF&sourceid=em&document_id=x745112&serialid=knrGGNw%2Bo620toTTx96qBQ%3D%3D

https://www.bostonfed.org/publications/risk-and-policy-analysis/2018/the-shift-from-active-to-passive-investing.aspx

 

FWIW, apart from some pockets of potential illiquidity-induced departures from NAV in the levered/synthetic categories of ETFs, I think a lot of people are overreading the phenomenon especially as a timing tool.

 

In theory, passivity consequences may show up in times of duress.

Interesting study showing that stress can help to show your true colors.

https://www.eurekalert.org/pub_releases/2018-09/osu-sfy090418.php

 

I think Mr. Soros calls this reflexivity.

https://www.opensocietyfoundations.org/sites/default/files/george-soros-general-theory-of-reflexivity-transcript.pdf