Asset pricing with index investing

• 成果类型: Article
• 署名作者: Chabakauri, Georgy; Rytchkov, Oleg
• 署名单位: University of London; London School Economics & Political Science; Pennsylvania Commonwealth System of Higher Education (PCSHE); Temple University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2020.06.023
• 发表日期: 2021
• 页码: 195-216
• 关键词: Indexing; risk sharing; Lucas trees; general equilibrium; Heterogeneous investors

摘要

We theoretically analyze how index investing affects financial markets using a dynamic exchange economy with heterogeneous investors and two Lucas trees. We identify two effects of indexing: lockstep trading of stocks increases market volatility and stock return correlations but reduction in risk sharing decreases them. Overall, indexing decreases market volatility but has an ambiguous effect on the correlations. Also, index investing decreases an investor's welfare, but indexing by other investors partially offsets the loss. When the introduction of index trading opens financial markets for new investors, the improved risk sharing makes market returns more volatile and stock returns more correlated. (c) 2021 Elsevier B.V. All rights reserved.