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In any auction, there has to be the first person declaring what the item is worth. If 100% of the investing is passive, there is no first bidder, so how is a st
by 11thEarlOfMar 10y ago
In any auction, there has to be the first person declaring what the item is worth. If 100% of the investing is passive, there is no first bidder, so how is a stock's value determined?
In the current situation, 34% of the money passively follows the active investors. That gives the active investors a 34% amplifier in their action.
I'd say the possible bad news is that the larger the passive pool, the less capital it takes to manipulate a stock price.
- qaq 10y agoThis is exactly how it will balance out. If this passes a threshold such that funds that take advantage of the phenomena will produce a meaningfully higher return than index funds then money will start flowing into such funds balancing out the effect.
- nradov 10y agoNot just actively managed funds. There will always be proprietary traders speculating with their own or their employer's capital. As long as some kind of active investors make up ~10% of the market that will be sufficient for price discovery.
- 11thEarlOfMar 10y agoThat 10% will be insiders.
- sokoloff 10y agoWho better to know the prospects of a company?
- OscarCunningham 10y agoI don't understand how this is supposed to work. Won't active investing still be a zero-sum game? So on average won't they still be making the same as indexers?