The more sophisticated part of the argument is that indexes require overexposure to thinly traded stocks and that in a market sell off the assets linked to the

The more sophisticated part of the argument is that indexes require overexposure to thinly traded stocks and that in a market sell off the assets linked to the index would see outflows, which require selling the underlying(s), which would cause a material price hit in illiquid stocks, which could cause a partial feedback effect as the index would then slip more. If one believes this to be true, one necessarily believes that illiquid index constituents are overvalued today relative to their actual enterprise value and will, at some point in the future, be sharply undervalued as a large number of computers controlling trillions of dollars attempts to implement a for loop shoveling money at you.