3 ms·
Index funds do not contribute to the process of price discovery. As long as a certain fraction of trades are performed by active investors, price discovery wil
by Excel_Wizard 7y ago
Index funds do not contribute to the process of price discovery.
As long as a certain fraction of trades are performed by active investors, price discovery will continue to be accurate. Currently, active traders dominate, making up the majority of trades. This fraction could be much smaller than it currently is and still be OK.
- jeffdavis 7y agoThere are still people discovering prices, and they are still getting paid somehow, probably by first-mover advantage. Are we sure that the right model is to just watch these first-movers and do what they do?