1 option
Indexing and the Incorporation of Exogenous Information Shocks to Stock Prices / Randall Morck, M. Deniz Yavuz.
- Format:
- Book
- Author/Creator:
- Morck, Randall.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w31975.
- NBER working paper series no. w31975
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2023.
- Summary:
- Savings increasingly flow to low-cost index funds, which simply buy and hold the stocks in a major index, such as the S&P 500. Increased indexing impedes incorporation of idiosyncratic information into stock prices. We limit endogeneity bias by showing that exogenous idiosyncratic currency shocks induce smaller idiosyncratic moves in the stock prices of currency-sensitive firms in proximate time windows when in the index than when not in it. Increased indexing thus appears to be undermining the efficient markets hypothesis that supports its viability.
- Notes:
- Print version record
- December 2023.
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