How The Passive Investing Mania Undermined Its Most Basic Assumption, Part Deux

I recently argued, “The markets are only capable of being efficient to the extent that investors, as a group, are efficient in their analytical processes and in how they apply them to the markets. Because more investors than ever before have abandoned price-sensitive strategies for price-insensitive ones the markets have also become less efficient than ever.” In this way, the popularity of passive investing has actually undermined its most basic assumption, that the markets are more or less efficient.

 

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