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Investing - Theory, News & General • Michael Green on Ratrional Reminder Podcast - Passive Indexing Critiques

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As far as I know, index fund managers don't buy stocks until they're added to their benchmark index. They do employ tactics to avoid the possibility that "active managers could attempt to exploit this predictable purchase" (which might conflict slightly with the previous sentence).
I think we're agreeing. My understanding is that, in most cases, they are permitted to do whatever they find necessary to track the index. Of course, it would create the potential for tracking error to buy early (or late). But if they need to buy a lot of stock at once, then attempting to buy it all in one block could also create tracking error if the trade doesn't fill.
Yes, we do seem to agree. One reason it takes talent to run an index fund is you have to be able to track your index without losing to front-runners (or come as close as possible). Other mechanics are also needed, such as managing liquidity.

Green is disingenuous, at best.

Statistics: Posted by exodusing — Fri Apr 26, 2024 6:46 pm — Replies 64 — Views 2860



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