hehaheha

Because passive does not necessarily mean index. You can be passive and concentrated (see ARKK). And more importantly real world indices are moving target to begin with. They’re just very rough approximation of market basket. SPX is not representative of market as it relates to mpt at all. In fact that’s likely one of the biggest myths in modern finance.

I know what you mean but this notion of buy and holding index was perhaps a mirage. It’s all theoretical and cynical side of me thinks it was “invented” as a way to appropriate pension and retirement funds into Wall Street machination.

That’s not quite right about passive and active though. It almost always resets every quarter (or other liquidity events). Passive introduced delayed price discovery and as a result greater volatility around earnings (or liquidity events). But over medium to long term passive vs active should not matter.

It’s not resurgence of active trading. It’s a new brand of highly levered trading. We’ve never seen anything like it before. This was highlighted at institution level with Softbank last year and recently with Bill Hwang and Archegos debacle. And you see retail trading weekly options in high volume. Is it gambling? When was investment not gambling? It was always “informed” gambling with positive expected avg return.

What’s the economic impact of this behavior though? I want to say it’s generally negative since it’s bound to grossly disrupt proper price discovery but was that even the case before this period of excess leverage? I doubt it.