The Distortion in Prices Due to Passive Investing

• 成果类型: Article
• 署名作者: Baruch, Shmuel; Zhang, Xiaodi
• 署名单位: University of Rome Tor Vergata; Shanghai University of Finance & Economics
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2021.4114
• 发表日期: 2022
• 页码: 6219-6234
• 关键词: partially revealing rational expectation equilibrium; conditional capm; market indexing; comovement; R-2; 100% indexing

摘要

In the capital asset pricing model (CAPM), it is ex post optimal to index. To examine the implications of market indexing, we develop a conditional CAPM with costless private information in which some investors are, for exogenous reasons, ex ante indexers. We show that, as more nonindexers become indexers, the price efficiency of stocks diminishes, asset prices comove, and the statistical fit (measured by R-2) of the CAPMregression decreases. We also report asset prices at the limit, when 100% of the investors are market indexers.