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"My thinking goes like this - as less money in invested actively, the market becomes less efficient at pricing." Wouldn't it be that the market becomes as effi
by rsync 10y ago
"My thinking goes like this - as less money in invested actively, the market becomes less efficient at pricing."
Wouldn't it be that the market becomes as efficient at pricing as the accuracy of index inclusion ?
That is, we have replaced the widely varying performance and heuristics of active stock pickers with the more formulaic S&P 500 pickers ?
Presumably that's a lot more efficient, but I suspect there is room for errors and games in index inclusion ...
- kgwgk 10y agoWhat do you mean by "pricing"? If there were only passive investors in the market, all the stocks would move together. Apple could announce that the next iPhone will be delayed until 2020 or Google could discover how to get energy from water and there would be no reaction in their stock price.