3 ms·
For one thing: as soon as the price of an asset drops far enough in the active market, all those people in the passive market holding the stock are going transi
by fallingfrog 9y ago
For one thing: as soon as the price of an asset drops far enough in the active market, all those people in the passive market holding the stock are going transition from "passive" to "active" in a hurry. So that breaks the assumption set right there: passive stocks are never truly passive.
- kgwgk 9y agoWhat do you mean? An ETF tracking the S&P 500, for example, is not going to sell a stock no matter how much does it drop (until it gets excluded from the index, of course).
- fallingfrog 9y agoPeople can sell their shares of the ETF, and as you say, stocks can get excluded from an index.
- OscarCunningham 9y agoThat's just not true. If I see that one of my stocks has just dropped by a huge amount that doesn't mean that it's going to carry on dropping. There's no "momentum" (at least on a short timescale).