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A comment on Index Investing Makes Markets and Economies More Efficient (2016). Parent comment

Re:Index Investing Makes Markets and Economies More Efficien... by jacobkg on Tuesday September 19, 2017 @02:25PM (#15287397)
That is not generally the case. Most index funds are 'market cap weighted' which means that hold funds in ratio to their market capitalization. If stock A doubles in price, it's market cap also doubles and the index fund will continue to hold the same number of shares.
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Re:Index Investing Makes Markets and Economies More Efficien... by Retric on Tuesday September 19, 2017 @03:13PM (#15287893)
Reread what I posted, that's what's happening.

If they own 1M$ of A and 1M$ of B, but B is worth more than A then they sell some of A to buy some of B.

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Re:Index Investing Makes Markets and Economies More Efficien... by stouset on Tuesday September 19, 2017 @08:04PM (#15289765)
You're leaving out a description of how they manage to own an imbalanced quantity of A and B in the first place.

Keep in mind that this doesn't (at least not naïvely) happen when one of the two increases or decreases in value relative to the other.

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Re:Index Investing Makes Markets and Economies More Efficien... by Retric on Wednesday September 20, 2017 @08:02AM (#15292742)
Stock buyback's are one example, but companies can also issue/aka create new stock from thin air and sell it. Though clearly less extreme than I was describing, the forces are similar.
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