Relative pricing between stocks is due to investors actively bidding up the price or letting it slide down. They do this based on either information about compa

Relative pricing between stocks is due to investors actively bidding up the price or letting it slide down. They do this based on either information about company fundamentals, or instinct on how the market will eventually react to news. This form of information or instinctual arbitrage nets active traders a profit. As an increasing number of low-intensity investors broadly invest in the entire market space, it overinflates asset prices and diminishes the efficiency of this market space, to a degree. It's hard for news to knock on VW stock prices, for example, if the index funds keep buying it like clockwork anyway. Of course, it's possible that this system increases information arbitrage, but the overall effect is that index funds become less efficient as more investors rely on them.