Tag Archives: market efficiency

Feb 3, 2021

Efficient Markets and Irrational Exuberance

Recent headlines have reflected the extraordinary behavior of GameStop Corp.; the company’s stock rose from $18.84 at year-end 2020 to $325 at the close on Jan. 29, 2021, then declined to $90 in the first two trading days of February. At year-end, GameStop was the 314th largest stock in the S&P SmallCap 600®. By the…

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Oct 15, 2019

The Gift of a Benevolent Providence

Suppose that I buy a popular exchange traded fund (ETF) tracking the S&P 500® today, leave it in my brokerage account for 20 years, and then sell it.  What return should I expect?  The answer, obviously, is that my return should reflect the movements in the S&P 500 (net of fees) over my 20-year holding…

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Jul 20, 2018

Proximate Cause

Our colleagues at S&P Global Market Intelligence recently completed a paper analyzing the impact of exchange-traded funds on stock-level pricing.  Their work found that “…the impact of ETF trading is transient and of only a modest magnitude under even extreme assumptions” (my italics).  This conclusion is a rebuttal to critics who believe that the growth…

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Aug 28, 2016

Worse Than Marxism?

The investment community was bombarded last week with a paper arguing that passive investing is “worse than Marxism.”  That any putatively-serious observer can compare an investment strategy, even one he doesn’t like, with a political ideology responsible for the deaths of millions boggles the imagination, but maybe I’m just too sensitive.  The paper’s argument seems…

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