Truths about indexing

Indexed investments have grown substantially during the past several decades, leading to dramatic changes in the asset management industry and the way people invest, as well as to significant cost savings.

This paper reviews the rationale for indexing’s efficacy, quantifies the benefits of indexing to investors, clarifies the definition of indexing, and explores the validity of claims that indexing has an adverse impact on the capital markets.

It shows that index fund assets account for only 10% of the global total investable market and 5% of trading volume on US exchanges.

Additionally, it finds no evidence to indicate that indexing contributes to fewer market opportunities for active managers, causes greater market volatility, or leads to a declining number of public companies.

 

(Click on the cover page image for the full document).

 

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One Response to Truths about indexing

  1. Alistair Burch August 5, 2018 at 3:15 PM #

    An interesting article on indexing at the moment. However not all of the investments can be in index funds as then there will be no price discovery. So at what point does the aggregate of the index funds turn the market from an efficient one into a zombie one?

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