Discussion about this post

User's avatar
John Taylor's avatar

“obviously you’re buying everything in proportion to its market cap and therefore you’re not changing anything.”

This statement has an implicit assumption that liquidity scales with market cap.

Because this is not true, and the biggest stocks get the biggest passive inflows, the biggest stocks tend to rise the most over time and they become much more volatile than the mid caps.

I’m just simplifying your argument here, feel free to let me know if I missed something critical.

Expand full comment
Andrew Schaefer's avatar

Mike, your work on passive has been really eye opening for me. I think your effort to bring awareness is admirable and will hopefully make its way to better policy making (fingers crossed). Regardless, you make the concept easy to understand, which should help spread the word and get the right people thinking about the potential ramifications of passive selling.

One question to ask though…how much has passive affected major European and Asian equity markets?

Expand full comment
7 more comments...

No posts