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A comment on A Professor Who Was Right About Index Funds All Along. Parent comment

Re:A Professor Who Was Right About Index Funds All Along by 11thEarlOfMar on Saturday October 22, 2016 @10:18AM (#12768769)
In any auction, there has to be the first person declaring what the item is worth. If 100% of the investing is passive, there is no first bidder, so how is a stock's value determined?

In the current situation, 34% of the money passively follows the active investors. That gives the active investors a 34% amplifier in their action.

I'd say the possible bad news is that the larger the passive pool, the less capital it takes to manipulate a stock price.

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Re:A Professor Who Was Right About Index Funds All Along by qaq on Saturday October 22, 2016 @10:40AM (#12768845)
This is exactly how it will balance out. If this passes a threshold such that funds that take advantage of the phenomena will produce a meaningfully higher return than index funds then money will start flowing into such funds balancing out the effect.
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Re:A Professor Who Was Right About Index Funds All Along by nradov on Saturday October 22, 2016 @11:21AM (#12769016)
Not just actively managed funds. There will always be proprietary traders speculating with their own or their employer's capital. As long as some kind of active investors make up ~10% of the market that will be sufficient for price discovery.
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Re:A Professor Who Was Right About Index Funds All Along by 11thEarlOfMar on Saturday October 22, 2016 @11:40AM (#12769107)
That 10% will be insiders.
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Re:A Professor Who Was Right About Index Funds All Along by sokoloff on Sunday October 23, 2016 @07:08AM (#12772998)
Who better to know the prospects of a company?
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Re:A Professor Who Was Right About Index Funds All Along by OscarCunningham on Saturday October 22, 2016 @12:57PM (#12769432)
I don't understand how this is supposed to work. Won't active investing still be a zero-sum game? So on average won't they still be making the same as indexers?
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