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> It pushes the correlation between stocks up. Citation needed. I seriously doubt that this is true. > And also it reduces discrimination between stocks which
by darawk 8y ago
> It pushes the correlation between stocks up.
Citation needed. I seriously doubt that this is true.
> And also it reduces discrimination between stocks which results in weaker stocks benefiting from just being in the index and being overpriced.
Not really. Retail investors allocating their money to index funds just leaves the price-setting power to the professionals, which, on net, ought to be better for price discovery anyway.
- cm2187 8y agoFirst result on google: https://www.bloomberg.com/news/articles/2018-09-09/asia-stocks-point-to-drop-dollar-holds-advance-markets-wrap https://www.bloomberg.com/news/articles/2018-09-09/asia-stoc... But it is kind of intuitive anyway. ETFs are becoming significant in volumes, so when net volumes buy or sell them, they force the sponsor to buy/sell the whole market reducing price discrimination. To have any price setting power you need large volumes.
- darawk 8y agoI don't see anything in that article that supports your point. Can you snippet out the part that you think does?