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| Author: | Woolley, P. Bird, R. |
| Title: | Economic Implications of Passive Investing |
| Journal: | Journal of Asset Management
2003 : MAR, VOL. 3:4, p. 303-312 |
| Index terms: | INVESTMENTS INVESTMENT INVESTMENT ANALYSIS INVESTMENT INCENTIVES |
| Language: | eng |
| Abstract: | Index funds have grown significantly in recent years in most of the developed markets as investors have become less satisfied with the performance of active managers. Further, the flow of funds to passive investing has been supplemented by a high level of quasi-indexing undertaken by numerous active managers fuelled by their perception that they have to strictly control their tracking error relative to their given benchmark. The focus of this paper is on the economic implications of this major swing to passive investing. The paper suggests that although a heavy reliance on passive investing might appear rational for investors, it may well prove not only to be to their economic detriment but also that of the national economy. |
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